Subprime lending and financial inequality in an agent-based model

Real estate bubbles often trigger financial and economic crisis. U.S. subprime mortgage crisis and the Spanish property bubble, both occurring in 2008, are recent examples whose consequences are still affecting the respective economies. The aim of this paper is to understand if the level of concentration of financial capital has an impact on the real estate bubble formation. We study the issue in a first scenario where mortgage loans are easily granted (subprime mortgages) and in second one with a stricter regulation for the access to credit. Our results show that the combination of capital concentration and easy access to credit gives rise to a strong economic instability and to a highly unequal distribution of wealth.