site
Home Page > Investment Property > UK Investment Property > The Credit Crunch

The Credit Crunch

The credit crunch is the term used to describe the sudden reduction in the general availability of loans or mortgages or the sudden increase in the cost of obtaining loans from the banks and mortgage lenders.

The thing is to not take it personally. The credit crunch means that the banks are more reluctant to lend to each other. The banks rely on the liquid transfer of funds between each other to fund loans to people. Now that they aren't doing this as much, it's harder for them to finance the type of mortgage deals seen in previous years. The banks are afraid of a collapse which is why the credit crunch is hitting us.

Brokers say that the crunch will get worse before it gets better, the US crisis is likely to dent confidence in the property market further, which in turn will affect house prices. We may see some more house price falls before things start to get better.


Why will this affect the property market?

Simple, with no mortgages, people can't buy houses, and this is forcing sellers to either withdraw their property from the market or accept a lower price. Mortgage companies have been pulling out at the last minute, or delaying for so long it's increasing fees all the time. The people who are hit the hardest from this are the first time buyers, as they can no longer get mortgages for up to 90% LTV (loan to value) anymore, instead they are having to find 25-30% of the price of a property themselves. This is putting property way out of reach. If you want to get on the property ladder for the first time you're going to have to save up!
Copyright © Artful Lodger Liverpool Ltd 2012 Student Property To Rent by ArtfulLodger.co.uk