There was a bubble in the United States, the United Kingdom and Europe which grew until it burst in 2008. In the US, loans were made against second rate properties such as poorly constructed houses, houses in rundown areas and trailer homes. In the years leading up to 2008, some banks allowed customers to “self-certify” their earnings when completing mortgage applications. Then they lent money to the value of up to four times the annual earnings without any real due diligence. That is why it is wise to restrict loans to a maximum of 70 per cent of asset value.

Source: Standard Digital August 11, 2016 08:03 UTC