Sub-prime problems persist

The crisis in the sub-prime mortgage sector has revealed itself with startling clarity.

Barclays has announced that it intends to sell its sub-prime loans business FirstPlus and so far has received just two offers.

Despite Barclays valuing the business at around £400 million, turbulence in the financial markets has led to both bidders effectively offering a price of zero.

The problems for sub-prime began in the US, with lenders there handing out poor credit mortgages to people who could not afford to pay them back.

The troubles that ensued have had a global effect and now investors are wary about entering into business based on sub-prime lending.

Despite the obvious concerns about the market, it is likely that sub-prime lending will continue but lenders will be slightly stricter about the types of loan they offer and who they offer them to in order to prevent further problems in the future.

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