Property prices to drop?
You can’t have failed to notice that there was somewhat of an international crisis going on…American lenders have been criticized for irresponsible lending causing chaos in the international markets. The US Treasury has used reserve federal cash to consolidate lenders.
The governor of the Bank Of England Mervyn King has now requested that Gordon Brown not bail out financial institutions in the way the US have done and this has sparked a fear that house prices will drop in the UK as lenders and their shareholders bear the brunt of this crisis.
The raises in mortgage borrowing rates of the last few months have put a little bit of caution into borrowers and this will have a knock on effect on house prices in the years to come. Combine this with the reduction in bank profits and shareholders payments and you have a more difficult position for many borderline borrowers in the UK.
Any crisis abroad will have the usual trickle down effect in the UK with finance and property the expected sectors to be hit hardest.
Gordon Brown still has the option to use reserve funds to back up affected lenders but seems unlikely to spend tax payers money for this purpose.