With so many lending companies offering their services, it is important for the borrower to understand the pros and cons of obtaining a home mortgage loan. Self cert mortgages are ideal for people who would want to take out a loan on nothing more than their claims that they can pay the loan back. Self cert mortgages are becoming increasingly popular in the UK where unfortunately, unscrupulous brokers are encouraging individuals to borrow more than they would have otherwise been able to, and this has to come at an eventual cost to the housing sector.
In the United States, mortgage lenders are very strict that the amount they let out is small, and this leads to the cutting off lines of credit to the borrowers. Due to this, less people are buying houses or properties, and this may very well cause market prices to crash. In line with this matter, the US housing market is hurting because people with debt problems are trying to rid themselves of their properties quickly, and there is actually market for that since there are many people who are interested in purchasing the properties at a cheaper prices, and there is an immediate need for these properties to be sold.
The UK housing market suffers as well. When the US housing economy drops and dips, expect the UK market to do the same. Experts believe that if this happens, there would be a slight dip in the economy, but it would not end up in as large of a slump as the US market. They attribute this to the fact that the self cert mortgage market is deregulated, meaning that there is no state interference and to the fact that since the UK has a high population, people are really on the look out for homes, and this would help keep the prices up despite the economic drop.
Experts point out that the UK self cert mortgage market lenders have loosened their criteria for lending, but it is not like the US. Many people are able to borrow up to four or five times their income. Lenders offset this by asking the borrowers to pay a hefty deposit to counteract the negative effects. Experts follow the adage of 'increasing supply plus lower demands mean falling prices'. As more people start mortgaging, house prices drop. If this keeps up, then the sector is in for an inevitable crash in the next few years. Of course, this could always change, but this is the trend seen as of now.
Many people would argue the point that US and UK markets have different criteria or point systems for self cert lending, but they are inevitably somehow dependent on each other. Another dark side to self cert mortgages is that the lenders, like banks, encourage people to lie about their income when applying. If a house or a property are used in the mortgage, they are padded up so that a larger amount can be taken out. Is there anything wrong with this process or policy? Well, the economy is certainly fooled into thinking that all properties are highly priced, but in reality, they aren?t. This could lead to repossessed properties being unsaleable because of their high prices. Imagine buying a Volkswagen then declaring its price to be that of a Ferrari. That is basically how the process goes.
With this, future buyers of properties are not sure if that is the actual value or if it the beefed up price designed to pay off the lender or defray additional costs. This type of belief tends to work against the housing sector since trust is thrown out the window, and people might not believe everything that is stated. This could be even worse for the housing and real estate sector. It's bad when debts rise and interest rates go through the roof, but for lying and back dealing to work into the picture makes it worse.
Interest rates would play the next deciding factor since the rates are always changing with the times, and lending institutions are always trying to find ways to make lending attractive to potential borrowers. Most people see this as a downside for the end user since it always comes out of their own pockets, and they see that most of their income goes to the interest rates.
In the general picture, self cert mortgages work well for those folks who need the cash, but once one starts padding the truth and the lenders themselves actually encourage it, everyone suffers and the country?s economy takes the brunt of it.
If you're interested in a self cert mortgage or if you've got more questions on the topic, take a moment to fill out this a short questionnaire, and one of SimplyFinance's representatives will contact you to introduce you to a self cert mortgage broker that will answer your questions and help you find the best self cert mortgage for your needs.