Sub-prime Mortgage Crisis Over?

Sub-prime Mortgage Crisis Over?

Shares in the London Stock Market today have reached their highest rate in almost 8 years.

This appears to fly in the face of all the panic created by the recent bad news from the US sub-prime mortgage sector. The UK market seems to have regained its composure.

However, does this mean that the crisis has finished? Should we expect this rise in share prices to continue or is it just a blip?

The FTSE currently hovers around 6700 which is significantly higher than the 5900 mark it was at shortly after the news broke from the American housing market. This was worsened when Northern Rock almost collapsed due to running out of funds!

It was when rumours of a rescue package for Northern Rock surfaced, that the recovery started. It seems that people have turned their focus elsewhere now.

There are also rumours of an interest rate cut from the Bank of England, altough that seems a tad optimistic as this could have adverse effects on inflation targets.

However, can this optimism be premature? There are still some financial products around that could cause more trouble and even some job cuts in the city! There are some who still believe that there is more bad news on the way with more defaulted loans causing problems once things appear to have blown over. This is echoed by the the three month rate banks lend to one another. This rate is still a bit higher than normal possibly highlighting a certain degree of nervousness.

So whilst there has been an upturn, it may be a bit early to breathe a sigh of relief!