Mortgage Market in the U.K

How is the Current Mortgage Market in the U.K?

The Mortgage-market in the U.K is one of the most sophisticated property markets in the world.
As of 2010, the number of mortgages have increased by 66%; new home-buyers are still experiencing problems when trying to acquire mortgage-loans. This extreme caution of lending out money was a direct result of the credit crunch and a poor economy.

The credit crunch: created a shortage of funds-making lenders more cautious of who was receiving a loan, and what loans were being approved. A fallout from the credit crunch, believed to have begun around August 2007-caused a rapid increase in the cost of credit and a loss of confidence in the financial markets throughout the United Kingdom. Mortgages were at an eight-month low in November; banks weren’t lending anymore; this put a huge strain on the U.k property market. Only 32,000 new-mortgage loans were approved in August 2008. Southeast England found itself suffering from a shortage in housing, due to this soon to be recession.

Employment levels plummeted, leaving many workers and sole supporters out of work.
The gross-mortgage lending dropped 9% from 13.6 billion in October of 2009: the mortgage market has gotten through some rough patches-but it remains a nightmare for new home buyers. The monthly total of mortgage approvals feel significantly since November 2009. This was the largest fall in the economy since WW2-due to the aftermath of the Global banking crisis.

By January 26, 2009: The U.K was officially declared to be in a recession, and exited it by the 4th quarter of 2009. The year 2010 showed promise; hope for continued recovery from the banking crisis-but lending remained stuck at its current level and the mortgage market continued to struggle to stability.

So why did this happen? Lack of funds? The money market was set into place to have available funds to lend money from bank-to-bank. Banks who supported the American sub-prime mortgage-market wrote off huge sums- that’s right, BILLIONS OF DOLLARS. Loss of confidence: lenders were afraid that house prices would plummet; mortgage arrears will worsen; and no one wanted to be the last one in a wide-open market.
The U.k mortgage-market seen bankers tightening lending criteria and the disappearance of 100% mortgages. Lenders insisted on customers putting large deposits as a down-payment for a house loan; bankers were trying to protect their investments.

By the end of 2010, the mortgage-market started to stabilize; now the problem is “Supply” v.s “demand.” The employment grew to a new high, and people wanted to buy homes. Lenders came forward with new mortgage products like fixed-rate loans, in hopes of meeting the high demand. It is clear that the U.K mortgage-market is facing some challenges in the future; it is possible that within a few years it will make a full recovery.