What should come first - an increase in mortgage liquidity or a rise in property prices?
Despite the Council of Mortgage Lenders in the UK (CML) forecasting an increase in UK mortgage liquidity in the latter part of 2010 there is concern that mortgage companies are waiting for a revival in the UK property market. This then prompts the question, what should come first, an increase in mortgage liquidity or a rise in property prices?
This is very much a chicken and egg situation in that an increase in mortgage liquidity is required to bring more buyers to the marketplace, which will then push property prices higher, while an increase in property prices will encourage mortgage lenders to increase their own liquidity. Ultimately, we will need to see a natural increase in the number of buyers in the UK which will then push property prices higher, inject more competition into the mortgage marketplace and eventually increase liquidity.
However, it seems that the UK property market may well need some assistance in the short to medium term and we may need mortgage lenders in the UK to bite the bullet and increase their liquidity as well as reducing their rates. The truth is that at least one party, either homebuyers or mortgage lenders, will need to take the lead to prompt a strong and viable recovery in the UK property market. But who will be brave enough?
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