What role has the mortgage market played in falling house prices? Is there an end in sight to the current collapse of the housing market? “Not in the near future” seems to be the verdict.
The government has, to date, prided itself on the management of the economy and the resilience of the UK economy versus the rest of the world. Many homeowners have enjoyed unprecedented growth in house prices. Those however not on the property ladder have been forced to rent as houses and flats in many areas, once considered a good “first time buy” have simply become unaffordable.
Rising costs such as fuel and food are hitting homeowners hard and repossessions have increased dramatically as households struggle to manage monthly costs. However, many commentators argue that it is the impact of banks and building societies restricting and withdrawing mortgage products that has been the key factor in the current housing crisis. As talk continues about the prospect of a recession the Chancellor, Alistair Darling has instructed Sir James Crosby, deputy chairman of the Financial Services Authority to conduct a review of the outlook for mortgage financing. His full report is due in October 2008 however, his interim report has just been published.
Homeowners and the Mortgage Market
The report does not make pretty reading for many home owners or lenders. In a nutshell he explains that:
- Banks and building societies are currently not able to secure cost effective funding themselves. Previously they were able to get this through the residential mortgage backed securitisation products. The market for these products has all but dried up. Alternatives are therefore required and fast.
- Higher funding costs for mortgage lenders mean higher prices or lower availability for borrowers. This is a disaster for mortgage borrowers and the wider property market
- Big leaps in mortgage rates are unlikely to happen without a further serious property slump. There are no quick fixes to be found, and the situation is unlikely to improve in the immediate future
- It seems unlikely that the government will be stepping in to bail out the mortage market
- It will take years for banks to adjust to this new era of lower leverage, and levels of new lending will remain low well into 2010.
How will this directly affect house prices? the Crosby Report predicts a fall in house prices of 30%. This is not good news for home owners looking to avoid repossession or those looking for a quick house sale or a sale in a reasonable time scale.
The advantages of finding a property cash buyer in this market are clear both in terms of speed and guarantee that a sale will go through. Assuming the finances stack up then it is worth investigating this further.
Molae Properties are specialists in property cash buying. Our clients situations range from those simply looking for a quick house sale plus those who are, relocating or facing repossession. We are able to buy your house quickly. Plus we can offer flexible terms to suit your needs such as delayed completion dates.
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