Economic Problem Analysis

Topics: Debt, Loan, Subprime mortgage crisis Pages: 4 (1270 words) Published: March 11, 2014
Final Analytical Application of Current Microeconomic events Introduction
The article ‘Financial crisis in the living room’ written by Renan Bourdeau on the 8th of September 2013 featured in the Khaleej Times. It questions the ramifications ascribed to the fact that the populace’s salaries are not increasing in congruence with housing costs. The article cites that the recovery of the residential estate in Dubai has featured in the news for quite some time and the prices of houses have soared, and have been accompanied by high rental costs for properties. As a result of the drastic increase in the housing prices which is bound to extend until the year ends, utility costs have flared up in the region. The credit crisis ascribed to the region has resulted in an increase in the cost of purchasing household equipment, as well as conducting routine household maintenance by approximately 3.69 percent (Bourdeau, n.d). The emergent question is what impact this surge is bound to have on consumer lending, debt repayment and borrowing. During the beginning of the year, over a five-month period, consumers took loans worth more than Dh9 billion, a sum that correlates with the whole of 2012’s increase. Moreover, the UAE presently represents more than 60% of the consumer debt within the GCC. Its ratio of debt to income is greater than that of the US and most countries in Europe. This is an unsettling sign that indicates mounting household debt within the country. In addition, most residents are experiencing trouble making loan or mortgage payments; they are making use of credit cards to make these payments. Making use of debt for purposes of debt repayment is a slow but sure burden that cripples individual finances since the annual interest rates pegged on credit cards are about seven times higher than the interest rates pegged on personal loans Bourdeau, n.d). In addition, personal loans are insecure, meaning that whatever individuals purchase with it cannot be utilized as...
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