By: Mike Campbell
The ripples of the sub-prime crisis spread rapidly around the world from their epicentre in the USA, thanks to the globalisation of the major financial institutions. Concerns about provisioning of bad debt led to the near melt-down of the financial sector and saw several established and respected names go to the wall. It was inevitable then, that money lending organisations would tighten their lending criteria and that financing for a new home would be harder to come by, leading to a sort of “mortgage rationing” policy amongst lenders. This choking off of buyers, combined with uncertainty triggered by the global recession and the belief that UK housing was seriously over-valued, led to a partial collapse of the house price.
It is an encouraging sign that UK financial institutions have started to ease off on the mortgage rationing policy as confidence slowly returns to the financial sector. Whilst 100% mortgages seem to be a thing of the past (at least for the foreseeable future), there has been an increase in the number of institutions with 85% mortgage deals available (from 189 to 226 companies) and the choice is now the widest in over a year. There has been a corresponding reduction in loans requiring a 20% purchaser’s deposit, but still more than 2/3 of UK housing loans require that the buyer can provide more than 25% of the required funding. This indicates that a cautious (and some would say more realistic) approach is still in force.
The Bank of Australia has raised its interest rate for the second successive month. The rate was increased by 0.25% to 3.5%. Australia was the only major developed nation to avoid going into recession in the current crisis. Australian inflation figures are at their lowest level in 10 years. The Australian dollar has risen by 23% against the US Dollar over the course of the year, rising from 1.434 to 1.105 against the Greenback in 11 months.
UK Mortgage Supply Getting Easier
DailyForex.com