The Effect of Self Cert Mortgages on the Housing Market

With so many lending companies offering their services, it is important for the borrower to understand the pros and cons of obtaining a 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 very much the rage in the UK where many individuals use them to line their pockets and become rich quickly, but this is at a 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.