Lakhasly

Excessive risk-taking in a favourable macroeconomic environment In the years leading up to the GFC, economic conditions in the United States and other countries were favourable.A large share of such risky borrowing was done by investors seeking to make short-term profits by 'flipping' houses and by 'subprime' borrowers (who have higher default risks, mainly because their income and wealth are relatively low and/or they have missed loan repayments in the past).Economic growth was strong and stable, and rates of inflation, unemployment and interest were relatively low.

Excessive risk-taking in a favourable macroeconomic environment
In the years leading up to the GFC, economic conditions in the United States and other
countries were favourable. Economic growth was strong and stable, and rates of
inflation, unemployment and interest were relatively low. In this environment, house
prices grew strongly.
Expectations that house prices would continue to rise led households, in the United
States especially, to borrow imprudently to purchase and build houses. A similar
expectation on house prices also led property developers and households in European
countries (such as Iceland, Ireland, Spain and some countries in Eastern Europe) to
borrow excessively. Many of the mortgage loans, especially in the United States, were for
amounts close to (or even above) the purchase price of a house. A large share of such
risky borrowing was done by investors seeking to make short-term profits by ‘flipping’
houses and by ‘subprime’ borrowers (who have higher default risks, mainly because
their income and wealth are relatively low and/or they have missed loan repayments in
the past).
Banks and other lenders were