Mortgage Lenders Are Tightening the Belts

Due to the global financial crisis mortgage lenders has been forced to review their lending policy. The banks are also feeling the crunch, and have had to make some tough decisions.

After finding that many clients are battling to service their mortgages the banks have had to repossess more and more properties. The problems increase when the mortgage lenders have to sell off these properties at a lower price than the owner’s outstanding debt.

Due to dwindling market prices, banks often find it difficult to recover the existing debt. If this happens once it won’t make such a big difference, but with increasing repossessions at a market that is deflated, it will hurt the bank in their bank vault.

Drastic measures had to be taken.

Instead of offering bonds of up to 108% of the purchase price, a first time buyer that needs a home purchase loan is now required to have a deposit of 10-20% of the purchase price. In addition, the buyer need to have sufficient funds to cover any fees involved in buying a property. This will ensure that the bank will be able to recover the full outstanding debt, should they have to go down that route.

This, in conjunction with more responsible lending and increasing interest rates, is making it more difficult for first time buyers to enter the property market. With more properties being on the market, but fewer potential buyers, will cause the purchase prices to drop.

Therefore, even though we are going through a global financial slump, with many, including mortgage lenders, fighting for their survival, there is light at the end of the tunnel. This is the opportune time to pick up bargains on the property market.

To apply for a home purchase loan, contact us and we'll be glad to assist: www.gpfmortgage.co.za