Rising mortgage costs, falling property prices

Rising mortgage costs, falling property prices and the downturn in the housing market are causing unforeseen problems

Turn on your television to watch the news or pick up any newspaper and all you will hear or read about is the rising cost of mortgage interest rates, falling property prices, the decline of the UK housing market and other doom and gloom forecasts connected to the UK financial markets and economy. Everyday, bad news hits the headlines as if no one had expected them to happen yet we were predicting a mortgage crisis due to irresponsible lending from the banks and a property crash as a result long before anything happened.

The UK government has had its head buried in the sand for almost a decade and nobody seems to be able to grasp that the financial economy is all linked together not just in Britain but across the world. Months ago we were predicting:

A mortgage crisis due to irresponsible mortgage lending
Banks running into difficulties due to financial restrictions
A downturn in the property market due to a shortage of money and ridiculous over pricing
Whilst the Bank of England would reduce the base lending rate, the banks would not pass these savings onto their borrowers

Whilst everyone including the Government, banks and estate agents are trying to talk the markets up, this is what we predict is actually going to happen.

Northern Rock will close its doors to new mortgage business and will send existing borrowers whose fixed mortgages that are coming to an end elsewhere.
At least one more major lender in the UK will close down or need to be taken over
Mortgages will continue to become more expensive over the foreseeable future
Mortgages are going to become even more difficult to obtain
Property prices are going to continue to fall in value
Repossessions are going to increase
Buy to let landlords will continue to dump properties back onto the market with many going bust
Numerous small estate agents will close down

FALLING PROPERTY PRICES

What we are seeing is just the tip of the iceberg. Nobody is being truthful about the real state of the economy and the deep trouble many specialist lenders find themselves in. There are tens of thousands of buy to let landlords who considered themselves millionaires twelve months ago who now find themselves sitting on property portfolios with negative equity.

Banks who irresponsibly continued lending 100% and 125% to value mortgages, blind to the impending disaster are now trying to cope with huge arrears and loans secured on property that does not cover the debt. So why and how has this crisis been allowed to happen?

The simple answer to this is two fold. Politicians are basically low calibre, unintelligent people who don't have the wisdom or intellectual capacity to see or understand the big picture. The problem is that anyone can stand for parliament and when you have all the idiots on your side, you know you are in the majority. Having elected someone who couldn't get a decent job in the real world they are then on a very short list to be given some of the most important jobs in the country. None of them are economists, none of them understand or are qualified to deal in world affairs yet nothing stops them from standing for and being given jobs that affect us all.

The other reason is that many bankers are just car traders in posh suits. The mortgage business has offered an opportunity for many shady characters to get into the lending market with the promise of huge profits. The Financial Services Authority have failed to control or understand the dangers of what has been allowed to continue and as a result, what anyone with a modicum of intelligence could foresee.

Mortgage lenders are calling for the bank of England to pour more money into the system to increase lending liquidity but everyone should understand that no one can lend or borrow themselves out of trouble. This is a major adjustment that has to be allowed to take its toll on everybody and wait until stability returns in a natural way. Trying to interfere and buy ourselves out of the problem will simply make the problem last longer and not heal the wounds; things will simply continue to get worse and cost everyone more money especially when the lenders are increasing mortgage interest rates.