Cooling of mortgage availability beneficial in the long run

Posted under General by Michael

Recent negative weak economic news flow is adding to the ‘gathering momentum of negative sentiment about the property market, experts indicate.  The housing boom that started in the mid-1990s means that house prices remain still almost 5 per cent higher than those two years ago, and nearly 10 per cent higher than May 2005 levels. According to Fionnuala Earley, chief economist of Nationwide, the tighter lending conditions that have resulted from the credit crunch, are making it tougher for potential buyers to secure a mortgage.

However, market analysts argue that the cooling of mortgage availability could prove to be beneficial in the long run. An expert says, “More stringent underwriting criteria should finally lead to fewer overstretched borrowers and thus a more sustainable and stable market.”

Nationwide released figures that portrayed a gloomy picture of the UK’s housing market. This immediately resulted in shares in Britain’s housebuilders like Taylor Wimpey sliding. The firm has already seen a sharp fall in activity in April. Some builders also have started cutting staff to get ready for a prolonged downturn.