Subprime mortgages have higher interest rates than standard mortgages because they are targeted towards borrowers with poor credit histories or low incomes who are considered high-risk borrowers. These higher interest rates compensate lenders for the increased risk of default.

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Subprime Mortgages

Question 42

Multiple Choice

Subprime mortgages

A) have lower interest rates than standard mortgages.
B) have higher interest rates than standard mortgages.
C) have a higher risk for the borrower than standard mortgages.
D) are the same thing as home equity loans.

Correct Answer: