By the early part of this decade, this was supported as well by an environment of low interest rates. This is an essential development since it fueled the boom in mortgages, aided no doubt by the traditional market psychology that real estate prices – particularly housing values – would perpetually rise.
The same market psychology encouraged investors to seek new avenues to enhance portfolio yields within this low interest rate environment. The financial market responded to this by introducing so-called structured products. These instruments are designed to repackage the traditional risks related to mortgage out of the balance sheet of banks while providing newer means to handle the financing of the mortgage.