Mortgage Defaulting in the UK

As the credit crunch has hit the UK hard and the economy has slowed, many men and women seem to be unable to make their loan payments.

This has been occurring over the past several years, especially due to unwise mortgage lending practices. But recently, even after the credit crunch crackdown that has put a stop to those unwise lending practices (where, for example, people could borrow 110% of the value of a house) it appears that the UK crackdown has not helped people to stop defaulting on their mortgage loans.

 

The State of the UK
According to the Wall Street Journal , August of 2008 saw a record number of defaults on mortgage loans, and it appears that these defaults are only going to get worse.

S&P's Ratings service saw mortgage loans default hitting 23.31% - almost 1 full quarter of all high risk mortgage owners. That number represents an incredible amount of money taken from banks and the economy, and it paints a bleak future of the rest of the economy and whether or not the housing market is going to right itself.

High risk borrowers, most of whom are a result of the poor lending practices of the past, have simply been missing or skipping their payments.

The Big Reason
One might think that with the defaults increasing as they are, banks would be tempted to repossess these homes and try to get their money back. But remember that the housing market has also slowed, and there are far more homes than there are people that want them. So while they could take the homes from these defaulting borrowers and try to sell them to make their money back, there are not enough people wanting to buy a house that it is likely the companies will not be able to sell it for enough to receive the money back that they are owed, resulting in more debt for both the borrower and the lender.

Most of those defaults were with the high risk lenders. But even the low risk lenders saw defaults rise .6%, which is almost 1/4th the % they were previously, up from 2.33% to 2.94%. All of the news about these home loans does not paint a good future for the state of the UK housing market .

Your Role
When this occurs in the housing market, the value of your own home goes down. That is why it is vitally important that, if you have loans, you make all of your payments, because if you loans default and your home is repossessed, in the current economy you are likely to get only a small percentage for the sale of your home than it is actually worth.

 





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