Effects of Commercial Mortgages on the Property Market
A lot of people who have experienced the recent credit crunch know that this is an unusual situation that has never been encountered on this way. The scale of the recent economic downturn has been astronomical and it looks as though any damage repair willtake a significant amount of time. So why is this situation so bad and what can we expect from the property markets in the years to come?
Well the massive scale of the problem has been caused by the approval of US government to allow banks to lend buy to let mortgage products to high risk mortgage borrowers a few years ago. The extremely irresponsible lending to high risk borrowers who had bad credit histories started off something that was never seen before. The banks dished out mortgage to virtually any one who walked through their doors and the mass amount of money lent to high risk residential and commercial mortgage borrowers was bound to come back and bite the institutions. And guess what, it did! The people who took out bad credit mortgage products started defaulting and when the banks realized that they had made a major judgment error, it was too late.
The large scale mortgage and best remortgage deals defaults started a property repossession activity on a mass scale and left many banks with huge shortfalls and a massive dent in their balance sheets. The credit crunch we see today is a direct result of the irresponsible lending and it may be many years before we start seeing any solid recovery.
The property markets of most western economies are still significantly down from their false highs and we will now need to wait for a good length of time before seeing any meaningful recovery. Any upside movement of the property market will depend on the buy to let mortgage lenders offering more residential and commercial mortgage products to prospective buyers. Until that happens, we are unlikely to see any meaningful recovery in the property market.