Monday, August 19, 2013

Buy to let mortgages - a cause of concern.

As seen in the previous surveys that buy to let mortgages have shown a sudden growth and it seemed to be a good news for potential buyers as it increased to levels not observed since the 2008 financial crisis but Lord Lamont who was a chancellor during the last recession in the 1990s has warned everyone of this sudden boom of which he fears could collapse causing more damage Han any good.

Although prospective landlords are taking advantage of the low interest rates but the former chancellor is concerned and thinks that the ministers should keep a close eye on these developments as this over rapid expansion was previously a cause of the demise of Bradford & Bingley, a company with its 200 branches and £20 bn deposits collapsed in 2008 after a sharp rise in funding costs amid the global credit crunch.

Lamont believes the government and Bank of England risk creating one property bubble in response to the collapse of another.

Analysts say today's boom in buy-to-let loans is the result of an increase in mortgages linked to the government's funding for lending scheme. The £80bn scheme – designed to improve the availability of credit – has pushed down mortgage rates with landlords offered rates of just 2.5%. Meanwhile, house prices also have shown an increase which is three times faster than the wages. This trend has also resulted in potential buyers increasing in number.

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