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The expectation hypothesis is an economics hypothesis saying that a strong expectation by lenders housing prices can be depended on itself to increase in the future increases of their willingness to extend mortgage credit to borrowers with low credit ratings, making subprime loans contributing to development of a housing bubble.[1]

Notes and referencesEdit

  1. "Subprime Mortgages and the Housing Bubble" by Jan Brückner, Paul Calem, and Leonard Nakamura Working Papers 2011 Federal Reserve Bank of Philadelphia

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