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Banks tighten mortgage criteria

A report by the Bank of England has today confirmed that UK banks tightened the criteria in relation to mortgage approvals over the last six months which has resulted in a significant reduction in the number of arrangements completed. While this in itself is a very disappointing development for the UK mortgage arena and the UK property sector, there may still be more bad news to come!

It is believed that UK banking operations will further tighten the criteria regarding mortgage arrangements over the next six months which together with the expected economic downturn could exacerbate a very difficult environment in the UK. The number of mortgage approvals in the UK has collapsed from over 135,000 prior to the credit crunch to less than 50,000 in August and there are concerns this figure could fall even further.

Liquidity in the UK mortgage arena is a major element of the sector and without it there is no way that UK property prices can push too far ahead. There is also the fact that mortgage providers in the UK have increased their deposit requirements in the short to medium term, to apparently offset their own risks, which will further reduce the number of mortgages approved in the coming months. Difficult times ahead!

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