Subprime Borrowers May Face New Hit Next Month

Trading Markets (10/09/08)
Subprime borrowers could be hit hard again in November when a new round of interest rate changes boosts their monthly mortgage payments to potentially unaffordable levels. The catalyst behind this phenomenon is a rising international interest rate called the London Interbank Offered Rate (Libor) that will determine how the rates reset on at least $24 billion in subprime loans next month. Fear among lenders has driven up the Libor in recent months and will affect approximately 121,000 U.S. subprime borrowers--13,400 in Florida alone--who will face payment resets for the first time next month. Analysts warn that this could mean as much as an additional 10-percent jump in the number of defaults among such borrowers.