By DPA
Budapest : The global economy will continue to suffer from the effects of the US sub-prime mortgage market crisis, the head of Organization for Economic Cooperation and Development (OECD) said Thursday.
“I don’t think we have seen the end of the problem,” OECD Secretary General Angel Gurria told reporters after meeting Hungarian Prime Minister Ferenc Gyurcsany. “We need more information about the impact.”
Gurria said that the biggest impact of the crisis was being felt in the confidence levels of the banking sector.
“The whole financial system…stopped giving loans to each other and to normalize this will take time,” he said.
Merrill Lynch, Citigroup and Morgan Stanley were amongst those banks that suffered billion-dollar losses after the sub-prime mortgage crisis.
The crisis is linked to mortgages given to people with unreliable credit histories, who then began to default in unprecedented numbers.
Investors began to pull out as asset values fell, and banks stopped lending to each other, as they were not sure who was exposed to sub-prime investments.
Gurria warned that the effects on ordinary people would be felt next year, when interest rates are reset.
“This is when interest rates are going to increase for many of the mortgage borrowers and we have to see how the system is going to proceed with that,” he said.