- 20
- Jun
There are a number of potential triggers that could be helping the housing to crash.
First of all the credit crunch has been making debt much more expensive in the past few months. As well as being more expensive, borrowing is also a lot harder to come by, with few of the cheap loans that were available last summer.
Secondly the buy-to-let sector is also heavily exposed after having grown out of almost nothing a decade ago to accounting for almost 8% of all mortgages today.
Thirdly, Britain like the US, has its own sub-prime or ‘bad debt’ housing sector, with such a loosening in credit standards in the past few years that as many as 5% of mortgage borrowers are using 50% of their pre-tax income to service their debt.
The UK has many mortgages with ‘teaser’ rates - mortgages that let borrowers get low repayments for the first couple of years and then move onto the more expensive standard variable rate (SVR). There has also been a massive rise in the more amount of interest-only home loans taken out which rested on the assumption that the capital value of property would always rise.
Unemployment levels are starting rise, along with the cost of living. Fuel and food costs have both rocketed, leaving many households pushed to the limit. With more repossessions taking place, the housing market is seeing a drop in asking prices, as banks try to recoup their losses.
