The present economic crisis is the most severe that any living being has experienced in their lifetime.
The crisis has been mainly caused by the very slip shod and easy going attitude of lending by many banks and building societies.
House prices soared due to the easy availability of mortgages and remortgages.
Self declarations of income were prevalent, both for employed and self employed applicants.
Some self employed applicants who had their business accounts showing as, for example, twenty five thousand pounds were self declaring their income by up to as much as two hundred thousand pounds.
It may have been tempting to do this to buy the house of their dreams, and for which their true income could never have acheived the granting of a mortgage to buy the property.
At the end of the day they could not possibily afford the repayment.
This meant that the banks and building societies were left with a large number of repossessed properties.
This self declaration of income has all but ceased. There are only two building societies now who accept this lack of income proof, namely Platform and The Mortgage Works.
Even these two lenders who vere towards the sub prime market reserve the right to ask for an accountant's certificate or even full accounts.
Anothr lending practice, which at the end of the day badly misfired, was the 125% mortgage, remortgage and secured loan.. Well believe it or not the 125% mortgage has already been reintroduced in a limited way.
The Nationwide Building Society has been the first to announce the 125% mortgage, with apparently two more of the major remortgage and mortgage lenders on the brink of following the Nationwide.
The way this 125% plan works is that if someone owns a property with negative equity, and has a 5% deposit to put down on a new house , the Nationwide will grant them a mortgage to purchase the property of up to 30% of the property value.
As the house buyer must have a 5% deposit, it truly is the return of the 125% mortgage/ remortgage.It is at present only available to existing customers of The Nationwide.
It must come as some relief to homeowners who thought they would have to stay in their current property for the foreseeable future,which could proof extremely difficult if they moved job for example.
However, on the other hand it does seem rather foolhardy as the 125% remortgage, mortgage and secured loan contributed in no small way to the current crisis, and caused the most common companies who used the 125% plan to founder, such as The Northern Rock which is now 100% state owned.
We can only wonder how long it will be before the other slack lending practices surface again.
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http://www.championfinance.com
