However, all of these problems are partly related to the good access to venture capital that has been created by high saving in some parts of the world. Credit granting has slowed down in a number of countries and the financial crisis has contributed to the recession in the world economy The problems in the housing market and the financial crisis that arose have led to credit terms being tightened in some of the world’s larger economies. The difficulties in obtaining loans have contributed to a number of companies experiencing difficulty in financing their investment, and have subdued household consumption. Falling stock market prices and house prices have contributed to household wealth declining rapidly in many countries. This also slows down consumption and investment. The financial crisis has contributed to GDP in the world as a whole declining this year and to unemployment rising in most countries. The Riksbank’s assessment is that the recession in the global economy in 2008-2009 will be the worst since the post-war period. 2  BIS Review 56/2009  Extensive economic policy measures have been taken In contrast to the way that economic policy was conducted at the end of the 1920s and the beginning of the 1930s, the authorities have on this occasion acted quickly and forcefully. Central banks have acted quickly In the United States the policy rate has been cut from 5.25 per cent in autumn 2007 to 0.25 per cent.
The lenders expected that house prices would continue to rise, increasing the value of the collateral, an assumption which meant that the risk to the lenders was assessed as slight. The strong increase in the new forms of mortgages contributed to the overheating in the housing market. BIS Review 56/2009  1  Another factor that can also be assumed to have contributed to the housing market bubble in the United States is the US housing policy, which since the mid-1990s had become increasingly aimed at extending house ownership among households. For example, the semi-nationalised mortgage institutions Freddie Mac and Fannie Mae were to offer a particular share of their total lending to low-income families. This contributed to many households receiving loans despite having an uncertain ability to repay. The credit expansion that was seen in the United States can also be seen in a number of other countries. In autumn 2005 the housing market bubble in the United States burst and house prices began to fall. As the value of the households’ most important collateral fell, an increasing number of households could no longer renew their subprime loans at the same low interest rate. The lenders had tightened the credit terms. The interest rate shock that followed meant that an increasing number of households experienced problems in paying, which in turn pushed down house prices even further. This occurred as an increasing number of households and banks were forced to sell the houses at compulsory auctions at a lower price than before.