by Mark Johnston
Its bonus season for city bankers and with big profits comes big bonuses for some working in global markets and investments. Those looking forward to six figure pay out will not be worrying about the strict lending rules that banks and building societies but in place following the financial crisis. The new rules require property hunters to have large deposits and these cash rich few will have just that.
The top earners will be polls apart from the thousands of first time buyers who are struggling to secure home finance on the most basic of property. Those that were lucky enough to get onto the market before the crisis find themselves with houses that are falling in value and are worried that they will soon be in negative equity.
But the extra cash that is expected to be pumped into the London housing market may well push prices up in the capital whilst the rest of the country struggles. Property experts have already seen a 4% increase in house prices in some parts of London whilst the number of enquires at estate agents has increased by 21%.
The UK mortgage and housing market is still very subdued, the number of new properties going up for sale in increasing but the number of mortgages that lenders are agreeing is still very low. A leading property website pointed out how the figures didn’t stack up, 1.3 million new homes came onto the market whilst only 530,000 mortgage were taken out last year.
In order to reduce the risk in their mortgage portfolio, lenders have moved away from the more risky first time buyer market and are instead looking to attract more well off customers who can afford to put down a large deposit. The larger the deposit the less the risk as the lenders holds the property deeds against the cost of the mortgage in case of default.
With borrowers being priced out of the market, the only ones who are able to secure a reasonable deal are those in the city who are set to get large bonuses. Director of the property website, Miles Shipside said: With lenders stating that they expect mortgage lending to remain static at around 2010 levels throughout 2011, and new seller numbers practically unchanged year-on-year, what might have been seen as a passing phase of low transaction levels in the housing market now looks set to be the norm for the foreseeable future.’
Because first time buyers and those with lower incomes maker up the larger share of borrowers, the market is struggling and is starting to stagnate as the lack of buyers is driving prices down but historically high loans mean that many sellers cannot afford to reduce their homes any further.
Diggle, a property economist at consultancy Capital Economics said: “Prices are trending slowly downwards at the moment, but our view is that this is really the start of the second leg of the correction, and we expect prices to fall significantly further.”
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