Both borrowers and lenders in the sub-prime mortagage market are whishing they had listened to the old saying: neither a borrower nor a lender be. Last year people with poor credit ratings borrowed $605 billion in mortgages, a figure that is about 20% of the home-loan market. It includes includes people who cannot afford to meet the mortagage payments on expensive home they have bought, and low-income buyers. In some cases, the latter could not even meet the first payment. Lenders, include banks like HSBC,which may have lost almost $7 billion. Both sides can be blamed. Lenders, after the 2-3 percentage point premium they could charge, offered loans, Knows as .liar loans., with no down payments and without any income verification to people with bed credit histories. They believed that rising house prices would cover them in the event of default. Borrowers ignored the fact that interest rates would rise after an intial period.One result in that defaultrates on these sub-prime mortagages reached 14% last year- a record . The problems in this market also threaten to spread to the rest of the mortagage market, which would reduce the flow of credit available to the shrinking numbers of consumers still interested in buying property. So, the housing market will remian weak: borrowes with weak credit histories histroies will find the credit window closed: people with adjustable-rate mortgages will have to spend less so that they can meet their increased payments: tighter lending standards and falling home prices will reduce consumer.s ability to tap the equity in their homes. But as long as the labour market remains strong, which it has done despite job losses in housing-related industries, and as long as real incomes contiune to go up, consumers might complain, but they are unlikely to go on a byers. strike on a scale that will make this slowdonwn become a recession. we should be a bit cautious and watch closely how things develop. Borrowers have been cought out become