2008 to be a tough year for mortgage lenders
June 4, 2008
Experts have stated that 2008 is going to be a very tough year for mortgage lenders in the UK, stating that the effects of the credit crunch, which has decreased liquidity for lenders, will make it difficult for lenders to find the money to finance loans. Inter-bank lending has become more difficult and expensive, which as increased the turmoil facing mortgage lenders. Officials from the Financial Services Authority have stated that the market conditions at the moment mean a very bleak year ahead for lenders.
There is some light at the end of the tunnel, as five central banks including the Bank of England and the United States Federal Reserve, and joining forces to inject cash into the global money market to ease the situation. However, in the meantime lenders will still have to face a struggle in the coming months, and consumers looking for more affordable mortgage deals will also have a struggle ahead of them.
The Financial Services Authority has stated that lenders need to spend time reviewing their strategies to minimise on impact wherever possible. One official from the FSA stated: “It is clear that some business models are no longer as economically viable as they used to be.” With reference to companies that are buying mortgage books, the FSA said that these lenders needed to consider “whether now is the right time to be exchanging liquid cash for illiquid mortgage assets”.
The FSA also expressed concern about the difficulties that will be in store for consumers that are due to come off cheap fixed rate deals in the coming months, as finding an affordable mortgage will be more difficult. The agency stated: “Many of these borrowers are on relatively high loan-to-value ratios or income multiples and will find it difficult … to refinance their mortgage on favourable terms, which will leave them facing a significantly higher interest rate on their borrowings, which may prove too much for many of them to afford.”
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