Mortgage market may not settle down for two years
June 1, 2008
Since the onset of the global credit crunch, which continued to wreak havoc throughout the financial markets in the UK, the mortgage sector has been in complete disarray, with lenders having to tighten their lending criteria, withdraw mortgage products from the shelves, increase interest rates, increase deposit requirements, and increase arrangement fees. It has become far tougher for lenders to secure the finance that they need to fund their mortgage lending operations, and it has become far harder for consumers to get hold of an affordable mortgage.
Whilst the government has ploughed billions into the money markets, and has recently launched a £50 billion mortgage rescue plan aimed at increasing liquidity in the mortgage markets, many have stated that this is going to take a long time to have any positive impact. In fact, officials from the Building Societies Association have recently predicted that it could take two years or longer for the mortgage markets to settle down following the chaos that has been caused by the global credit crunch.
With regards to the mortgage rescue plan launched by the government one industry professional stated: “It will not in itself solve the credit crisis, it certainly isn’t going to reverse all the changes in lending policies we have seen in recent months, or restore mortgage lending to its former levels, but it should help to underpin confidence. It is vital for the Bank of England to remain very close to what is happening in markets, and it should not hesitate to intervene further and extend the facility if that is what is needed.”
He also said that building societies were faring far better than banks and larger lenders, adding: “Clearly we entered troubled waters in a fundamentally sound vessel. Societies generally are well capitalised, highly liquid and prudent businesses.”
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