Lender beware !

It is said that when the USA sneezes the world catches a cold ! That sneeze is still reverberating through home lending in most countries - and causing huge problems here in Australia.
The trouble started when what is called " sub-prime " lenders emerged to do battle with traditional finance houses such as banks and building societies. Prudent lending policy went out the window and cut rate finance was offered to people who had only a marginal capacity to repay - and is many cases the loan was for the entire asking price of the property - and sometimes even in excess to finance additions such as furniture or a swimming pool.
That was fine as long as the bull market had ever rising house prices, but when interest rates rose those on tight margins were in trouble and mortgage sales began to multiply.
That created a new problem. When house prices tanked and actually fell, some found that selling the property would not even meet the amount of debt owing. As a result, the lending authority took a loss - and that's where the panic began !
People looking for a house loan today are going to find that it is a whole new ball game. We can expect sub-prime lenders to pull their horns in and the days of one hundred percent loans may be over. Lending institutions will look most favourably on those able to offer a hefty deposit - and have an income from which loan payments represent less than thirty percent.
The crystal ball gazers offer differing interpretations of how the housing market will look in the next few months. There will be a flood of mortgage sales due to the recent interest rate rise - and as a result house prices may decline sharply in some areas. New home construction will feel the pinch as it will take time to sort out the mix in the existing home market - and loans will not be as easy to obtain.
The winners will be those who can hang on, service their existing loan and wait for the inevitable market rise to occur.
We have a growing population - a lack of building land in desireable areas - and that means future rises in home prices.
The losers will be those renting. This glut may temporarily put a hold on rents, but looking to the future the only direction seems to be - up !