UK mortgages feeling the squeeze
As another high profile British bank announced a change in its mortgage policy in the wake of the global credit crunch, things look set to get worse before they get better. The latest move has focused around attempts to reward individuals who are in the position to offer higher deposits on their houses. This, of course, penalises many first time buyers who simply cannot afford to put down a large deposit on a first house.
Even though the average house price across the nation is dropping, the cost of buying a home is still going to be out of range for the average first time buyer. The Government has recently announced plans to develop ten sites with ‘affordable’ and ‘green’ housing by 2010, but what state the economy will be in at that stage is very difficult to predict. More than likely, these things will sort themselves out, as they always do, and for once the winners are unlikely to be financial institutions. The banks have to protect themselves against crises such as those experienced in the American sub-prime lender market, and therefore they will offer loans and mortgages that pose less risk to them, but also less profit. The losers will probably be those at the bottom of the scale, who cannot afford to get onto the ladder in the first place.
Things are not altogether gloomy though, most financial institutions continue to offer good deals on
loans, such as Alliance and Leicester. What you won’t find at any of the banks are the 100% mortgage deals that you would have been able to get only a few months ago. The global crunch is already putting a close on these kinds of offers, which is really a good thing, if individuals have to apply for mortgages at those kinds of rates then they are not in a stable enough position to buy a home. Whilst it is indicative of vastly over inflated housing costs, it is simple practicality not to stretch yourself beyond your means. In recent months the banks have suffered for failing to be practical, as have the individuals who have defaulted and lost their homes, but any events that result in more prudence, particularly as far as personal finances are concerned, has to be a good thing.