Credit crunch a wake up call

27/02/2008 by Dave.

Financial experts have claimed that harsh lessons on bad debt and unrestricted mortgage lending for residential property have been dealt out by the credit crunch.

Noting a changing climate for lending in the US and the UK, independent financial services group Blevins Franks claimed that mortgage products were getting harder to come by, but saw the downturn as an inevitable part of a cycle.

Matthew Weston, overseas mortgages manager for Blevins Franks, claimed that the effects of the credit crunch were helping to breed more caution in the UK and the US – among lenders and borrowers alike.

He said: “Lenders over there [USA] have become more risk averse since the credit crunch. High risk profiles such as non-resident buyers and subprime clients have noticed the biggest changes.

“When times are bad lending becomes more restrictive and then frees up again as and when the economy strengthens. In a way it serves to educate mortgagors not to borrow recklessly.”

According to the Global Property Guide 2007, US home prices fell five per cent year on year in October 2007, slipping to an average value of $207,800 (£106,000).

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