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New Articles:
- Hawaii delays NMLS Mortgage Company and LO Licensing
- Colorado Mortgage Companies must now be Licensed
- The SAFE Mortgage Licensing Act
- California DRE now requires Mortgage Loan Originator Endorsement through NMLS
- Washington Adds Servicing Licensing Through NMLSR
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Information herein is for educational purpose only and is not meant to be a complete statement of all state mortgage licensing requirements. Additional State and FHA mortgage licensing requirements may be required. If you need further information, we would encourage you to contact us directly.
How house prices relate to your mortgage
House prices and the state of the property market are intrinsically linked to mortgage lending and mortgage rates. In times of prosperity, when the housing market is booming, mortgage lending will increase.This relationship between the housing market and mortgage lending was exemplified in the UK in the decade between the 1990s and the mid-2000s, when house prices soared nationwide. The dramatic increases in house prices in property buzz-centres like London, and in areas all over the UK, coincided with a period of lower interest rates, more relaxed lending criteria, and a period of cheap credit.
In times such as these, with the economy going strong, mortgage lending increases as mortgage lenders can afford to offer mortgage deals at low rates with high loan to value limits. Essentially, if house prices are high, the lenders can make more profit and will make mortgages more readily available. This was experienced during the UK’s 90s property boom where more and more people were able to buy-to-let and niche mortgage sectors such as adverse credit lending sprang up.
However, the 90s property bubble couldn’t keep on expanding in such a dramatic fashion and as the credit crunch bit in 2008, initially sparked by problems in the US sub-prime mortgage lending market, the boom began to slow. And so we now see the relationship between house prices and mortgage lending reversed.
In somewhat of a vicious cycle, the credit crunch led to much tighter mortgage lending criteria, with lenders afraid to lend to each other, let alone the everyday consumer. As a result, fewer mortgages became available and borrowers could no longer afford mortgage loans, and so house prices started to fall.
In a bid to boost the housing market, the Bank of England has repeatedly cut interest rates, leading in turn to lower mortgage rates. However, a lot of consumers are choosing to invest their money until house prices reach their lowest. Banks such as Alliance and Leicester are currently offering attractive rates on their savings accounts which you can open online, and many people are still choosing to save over purchasing.
It remains to be seen how the house price-mortgage lending relationship will develop throughout the current recession, and how long it will take for the UK’s housing market to return to a more stable state.