Ever since the property market crash in the United States in 2008, home loan (or mortgage) lending institutions worldwide have been exceedingly cautious about lending their money. This is because the collapse of home loan lenders Freddy Mac and Fannie Mae in the United States had such a strong knock-on effect on property and financial markets worldwide, which resulted in a downturn in most countries’ economies. Many countries have still not recovered and their economies remain on shaky ground to this day.
Property markets worldwide are strong indicators of how a country and its residents are doing financially. When people feel secure in their jobs, are earning good wages and the economic trends and forecasts are good, they consider buying their own homes. New building starts show confidence by the construction sector that they will be able to lease or sell the properties they are building at a profit. New businesses need new premises and existing businesses which are doing well need larger offices or plant space, thus prompting the building sector to create more and better buildings. All these are good economic indicators, as unemployment figures drop because workers are needed to produce the materials used in construction, as well as those who are employed on the building sites. Balance of payment numbers improve as imports and exports of goods and services return to a more balanced state and the life of the average man on the street improved exponentially.
Under the above circumstances, home loans are not difficult to come by and are offered by most lenders at fair rates, but because the home loan industry fluctuates with these property market trends so that when times are good, mortgages are relatively easy to acquire; but when the economy does not give off the right signals, all the lending institutions make it much more difficult for Mr Average to get a home loan.
The spin off of all these factors results in fewer mortgages being granted, which simply means less business and therefore less profits for the lenders. Fewer properties are bought and sold and the spiral therefore continues downwards into a Catch 22 situation. In order to put the brakes on this downward spiral, the financial institutions have lowered their interest rates and have loosened up on their rules and regulations in order for these banks, building societies and other financial lenders to begin attracting customers once again and to try to get the property market moving in an upward direction.
This is exactly what has happened in the United Kingdom. Interest rates on mortgages are at a 30-year low and house prices are not increasing much month on month; thus the lenders are trying their best to sign on new mortgage clients. In order to quality for a home loan, each individual needs to approach as many banks, building societies or other home finance lenders to find out their pros and cons, so that they may be compared one to another to find the best possible terms, because each and every lender will have its own rules and regulations.