US problems likely to affect UK, say National Homebuyers
It may become more difficult for buyers to get a mortgage in the future, making it more difficult to make a quick property sale.
[UKPRwire, Thu Sep 27 2007] That is according to Paragon Mortgages' chief executive Nigel Terrington, who told the Financial Times that turmoil in the financial markets is likely to affect the mortgage industry in the UK.
He predicts that lending criteria will be tightened in this country in response to the chaos that is affecting the US market after lenders were too lenient with whom they gave mortgages to.
British firms will be keen to avoid a similar disaster and so are likely to make it more difficult for people with poor credit to get onto the property ladder.
"It's too early to be certain, but I do think there will be a legacy, which will be that net mortgage costs will be higher than before," Mr Terrington told the publication.
"People may have to pay more for both mainstream and specialist mortgages, such as buy-to-let.
"We have already seen it with sub-prime loans and there will be a trickling effect on other products," he added.
Tightening lending criteria will have an effect on how many buyers there are in the market, reducing demand and potentially having a negative effect on house prices.
The UK's leading fast property purchase company, National Homebuyers receives hundreds of calls from homeowners everyday; their key concern are interest rates. Many of the enquiries are asking for quick sales because they can no longer keep up with the rising costs of mortgage repayments.
David Harber, National Homebuyers said; “We will see many more concerned home owners calling us for a quick sale as the reducing amount of buyers continues.
"Thousands of homeowners have to sell their biggest asset as their mortgage repayments are becoming unmanageable.
“During June and July when there was a lot of speculation that the Bank of England would raise interest rates a further quarter to 6%, we received enquiries from people unprepared to meet a further hike in their monthly repayments.
"Our analysts advise that mortgage increases are highly likely and this will cause further strain on the homeowner - forcing them to market their property at a time when buyers are sparse.
“The continued trend in August, during the summer months when we expect people to be away from holiday and forgetting their worries, just supported the instability of today’s property market.
“The government, property market and mortgage lenders need to get to grips fast, before we see the whole market fall apart.”
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