The UK has been experiencing problems in the mortgage sector for some time – in fact, since the global credit crunch made its way across the Atlantic last summer. Since this time the mortgage industry has really suffered, with funds drying up due to lack of availability and affordability on the wholesale money markets. With lenders finding it more difficult and expensive to secure finance for their mortgage lending operations, consumers have really suffered.
The number of mortgage products on the market has plummeted by two thirds since last summer, leaving consumers with very little in the way of choice. In addition to this lenders have also hiked up their borrowing costs for new customers, and this includes interest rates as well as mortgage arrangement fees, leaving many consumers unable to afford to take out a mortgage. The global credit crunch has also resulted in far tighter credit conditions coming into play, so many people that may have previously qualified for a mortgage may now find that they can no longer get the finance that they need.
In fact, the problems in the mortgage sector have reached a point where the Bank of England has had in pump billions of pounds into the money markets in order to try and ease the problems. It has also recently launched a £50 billion mortgage rescue plan that will allow lenders to swap mortgage based assets for government bonds, hoping that this will help to increase both confidence and liquidity in the mortgage sector. However, despite these actions officials from the Council of Mortgage Lenders claim that the problems in the mortgage sector are continuing, indicating that many people could still find that getting an affordable mortgage is an impossible task.
Michael Coogan from the Council of Mortgage Lenders said: “The next few months will remain very weak for house purchase activity for the funding reasons which are now well rehearsed. We still await first signs of the Bank of England’s special liquidity scheme indirectly helping to ease the current logjam.”
Consumers have found that they are also being asked for far larger deposits from lenders in order to get a mortgage, and this has made it increasingly difficult for many, especially first time buyers, to afford to take out a mortgage. Coupled with all of the other problems in the mortgage sector the outlook looks very bleak, and has severely affected the sale of properties in the UK, even though house prices have been falling over recent months.
Industry officials have predicted that the number of property sales will continue to slump, with figures already showing a serious fall in housing sales which could even see fifteen thousand estate agents lose their jobs due to lack of business.
This in turn could continue to affect house prices, with one economist stating: “Very low housing market activity seems certain to feed through to further depress already markedly weakening house prices.”
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