The UK’s property market is showing signs of struggling in the wake of the bad credit mortgages results a 0.6% drop in house prices in September as 100% mortgages lender Northern Rock crisis took hold.
The fall represents the biggest fall since last December and has pulled annual house price inflation down to 10.7%, its lowest level since May, according to Halifax, the UK’s Britain’s largest mortgage lender. Effects of the bad credit mortgages debacle.
100% mortgages lender Northern Rock crisis has dented confidence along with the bad credit mortgages effect from the USA.
Overall house prices defied the gloomy predictions of some recent headlines, but their underlying growth is still on a decelerating trend
But will the 100% mortgages lender Northern Rock affair tip that market into a full-blown price crash?
100% mortgages lenders have been leading the way when it comes to income multiples. Property research specialists Hometrack examined every local authority area across the UK and compared house prices with incomes.
Researchers also produced figures to show the ratio of house prices to household incomes, based on the cost of a two – or three – bedroom house that young households need. The figures illustrate how much young people need to borrow to enter the housing market. Many 100% mortgages lenders have had income multiples of up to 5.9 times your income with a high credit score.
It found that prices were 5.08 times income in London, 4.84 times income in the South West, and 4.67 in the South East. There were 40 local authority areas where prices were greater than 5.5 times incomes. The least affordable area was Kensington and Chelsea, where prices are 9.23 times income.
Sixteen of the least-affordable areas are located in the South West, with house prices ranging from 6.96 times income in Christchurch to 5.58 times in West Devon. At the other end of the spectrum in 2006 there were just 19 areas where house-price-to-income ratios fell bellow 3 times incomes, you can understand why 100% mortgages lenders offer high income multiples to borrowers with a strong track record of managing their credit.
There is a market for 100% mortgages and larger income multiples but borrowers must not overstretch them selves.
Members of the monetary policy committee held rates at 5.75% despite intense pressure for an emergency cut, to shore up the bad credit mortgages effect.
The Bank Of England held its ground in the wake of the bad credit mortgages crisis. Focusing on inflation rather than economic growth.
Inflation is running at below the 2% target at 1.8% but economists still reckon the next rate move will be done which would be a huge relief for borrowers with bad credit mortgages. Many are forecasting further rate cuts next year.
An impact from the bad credit mortgages markets are still in the pipe line and will take its time to express itself in growth and spending.
Halifax – owner HBOS has abandoned its target for mortgage market share, signalling that it fears the industry could face a surge in loans defaults. This type of business leads to bad credit mortgages.
Andy Hornby – “Now is the time to deliver a balance between volume, margin and bad credit risk.”
There are fears that consumers have overstretched themselves and that the housing market could go into decline. Especially bad credit mortgages who still want to borrow will have to pay higher rates. People with bad credit mortgages could be stuck with their existing deals for much longer than they thought.
Higher borrowing costs will inevitably lead to a slowdown in the mortgage market many bad credit mortgages borrowers will struggle to get a competitive deal.
100% mortgages lender Northern Rock is being looked at for a take over by Mr Flowers private equity group JC Flowers.
The struggling company famous for its 100% mortgages product the together mortgage package could be brought by his bankers which include JP Morgan, Credit Suisse and Wachovia.
Northern Rocks best performing products is its 100% mortgages and buy to let mortgage deals.
He would want to persuade the credit rating agencies to maintain Northern Rock’s credit rating to avid funding problems.
100% mortgages are a high risk mortgage product that needs pricing carefully in today’s market.
