zinc, as Dub says the borrower's interest bill increases and with inflation roaring away particularly in essentials like petrol and other energy costs their ability to pay dimishes. The third blow of course is probably the most dangerous and that is that the value of their property is dropping and could drop a lot further. Lenders will be pretty quick to revalue their security and at least for a few years there is only one way for that valuation to go, down and possibly down a lot.
So higher costs to service the mortgage, less ability to do this, and in many cases negative equity in the property will in the longer term mean a very large number of forced sales and personal bankruptcies. This really has not dawned yet on a lot of homeowners, particularly in the US although the UK is getting a bit shaky as well. Recent statistics in the US for ARMs and investment property lending are scary. Something like 40% of home loans in the last 2 years have been ARMs, up three or four fold from normal. Something like the same percentage of house and condo purchases have been 2nd or 3rd homes purchased as investment properties. These 'investment' properties of course have provided the stock for the Yanks to play their favourite game of "flipping" properties. Trouble is the music has stopped dead, the buyers have disappeared and in many cases the investor is deep in the doo doo.
