Mortgage crisis set to create new generation of savers
Monday, 03 Mar 2008 (www.myfinances.co.uk)
Mortgage-lenders' reluctance to provide high-value loans to borrowers will see the UK revert to the old-fashioned culture of saving, experts predict.
Adverse credit conditions have prompted lenders to pull in their belts when it comes to helping riskier borrowers to remortgage or get a home loan.
Scores of banks and building societies have ditched products which provide loans equal to or more than the value of a property which has made it harder for people with no deposits to get buy a home.
Katie Tucker, technical manager of mortgage broker John Charcol, thinks tougher conditions will encourage people to save more money for deposits instead of relying on "easy-money" which mortgage firms have been happy to supply up until recently.
Nationwide recently announced it was raising the interest rate on mortgages with a 75 per cent loan-to-value (LTV) by 0.20 per cent.
Stuart Bernau, the firm's retail director, speaking to BBC Radio 4's Moneybox programme, said it had made the move because the cost of funding for banks and building societies had gone up, house prices were more neutral and so there was more risk.
"We don't like to try and make it more difficult for people to get on to the housing ladder," he told the show.
"But you're seeing a housing market at the moment where demand has gone right down, and we believe that we have to pay the price the extra risk that people who want to borrow a higher percentage actually have for the society."
Now Ms Tucker has predicted the moves by Nationwide and other lenders will mark a return to our parents' generation's philosophy of painstakingly putting money aside each month.
"It will have a knock-on effect for the whole economy as it takes spending money for those age groups out of the retail system."
http://www.myfinances.co.uk/news/mortgages/mortgage-advice-uk/mortgage-crisis-set-create-new-generation-savers-$1209011.htm
Mortgage-lenders' reluctance to provide high-value loans to borrowers will see the UK revert to the old-fashioned culture of saving, experts predict.
Adverse credit conditions have prompted lenders to pull in their belts when it comes to helping riskier borrowers to remortgage or get a home loan.
Scores of banks and building societies have ditched products which provide loans equal to or more than the value of a property which has made it harder for people with no deposits to get buy a home.
Katie Tucker, technical manager of mortgage broker John Charcol, thinks tougher conditions will encourage people to save more money for deposits instead of relying on "easy-money" which mortgage firms have been happy to supply up until recently.
Nationwide recently announced it was raising the interest rate on mortgages with a 75 per cent loan-to-value (LTV) by 0.20 per cent.
Stuart Bernau, the firm's retail director, speaking to BBC Radio 4's Moneybox programme, said it had made the move because the cost of funding for banks and building societies had gone up, house prices were more neutral and so there was more risk.
"We don't like to try and make it more difficult for people to get on to the housing ladder," he told the show.
"But you're seeing a housing market at the moment where demand has gone right down, and we believe that we have to pay the price the extra risk that people who want to borrow a higher percentage actually have for the society."
Now Ms Tucker has predicted the moves by Nationwide and other lenders will mark a return to our parents' generation's philosophy of painstakingly putting money aside each month.
"It will have a knock-on effect for the whole economy as it takes spending money for those age groups out of the retail system."
http://www.myfinances.co.uk/news/mortgages/mortgage-advice-uk/mortgage-crisis-set-create-new-generation-savers-$1209011.htm
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