the recent news that HSBC lost £8.7bn as a result of the American credit crunch shows the extent of the problem. Not only have the banks lost money on buying secured subprime loans, but they are also finding it very difficult to secure the securitisation of new mortgage loans. Therefore, they are having to raise finance from elsewhere. This helps to explain why:
- Mortgage companies are increasing the cost of mortgages. (My mortgage lender didn’t pass on the recent interest rate cut)
- Ending 125% and 100% mortgage. Firms are increasingly wanting 10% and 25% deposits, making it very difficult for first time buyers to get on the property ladder
- Weakness in house prices. The increased difficulty of getting a mortgage means there are less first time buyers coming onto the market. Therefore, house prices are likely to continue their downward trend. However, there is also a trend for the housing sector to be dominated by property and buy to let investors. i.e. there is a change in the composition of the housing market – increasing the likelyhood of an increase in the size of the renting sector.
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It all certainly spells trouble. I’ve just been over a another blog reading about the changes in debt over the decades & I noticed some interesting stats about mortgage rises vs wage rises.
Debt statistics article
To quote “According to the Office for National Statistics, wages rose by 92% during that 10-year period – but house prices rose by 204%.”
Everywhere I look, I just see trouble brewing. I just hope my fears turn out to be wrong…
[...] As a result of the credit crunch, the UK has seen a change in the mortgage market. Mortgages have become more expensive. Risky mortgage products like 125% mortgages have been removed from the market. (mortgage squeeze) [...]
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