June 9, 2009

Existing loan books effecting market

The question being asked by potential borrowers in the UK is why after receiving billions of pounds from the government are lenders still not issuing mortgages at a rate that suits buyers.

The problem is that even after getting their hands on the governments handouts the lenders are still saddled with mortgages secured on properties that are actually worth less than the outstanding amount owing.

This places the banks in a situation where they are having to prop up the loan to value figure in order to keep their own heads above water.

The only saving factor would be if and when the property market returns to a level that evens off the balance between the outstanding loan amounts against the value of the property that it is secured against.

Source [Property Wire]