123ArticleOnline Logo
Welcome to 123ArticleOnline.com!

ALL >> Investing---Finance >> View Article

Can The Uk Housing Crisis Be Eased With “hard Money” Loans?

By Author: Chris Westerman
Total Articles: 133

The housing crisis in England and Wales is one where too few homes are being built because would-be buyers can’t get loans. “Hard money” loans as a solution considered.

“Hard money” loans – more commonly issued in the U.S. but which exist in UK lending between private parties, for the most part – allow lending to individuals and companies that may not be able to get traditional loans from a bank. They are collateralised, where an acceptable amount of equity in an asset will assure the lender that their loan is protected (a loan-to-value ratio of 60-70 per cent, usually) in case of a default.

With lending at the crux of the UK housing crisis, can these hard money loans help ease the problem should they become more prominent? Will homebuilders or homebuyers be able to achieve financing with these subprime loans where they could not through traditional channels?

Most analysts do not think so. First, as private deals, hard money loans are unlikely to happen on a mass scale absent a larger, established lending institution. And the value of land, being what it is, as the basis for the collateral is unlikely as well – who can own land and yet not afford to build (other than, perhaps, inheritors of land)? Also, so-called hard money loans are typically made with short-duration terms, three years or less – good enough for a builder, perhaps, but hardly enough time for a home owner-occupant.

There are reasons to think that Brits would be able to start building and buying more homes. A poll of market watchers taken by the Reuters financial news agency in February 2013 found some hopeful signs:

• British home prices have not crashed as deeply as those in America. People who owned houses before, say, 2007 are in a good position to trade up if their income allows.

• While the threat of a triple-dip recession looms, more people are working in the UK than ever before.

• Interest rates from the Bank of England have remained steady at 0.5 per cent for those who qualify (which usually requires a good down payment on the property they wish to purchase).

• At the end of 2012 mortgage approvals rose to 55,785 and are expected to climb steadily higher in 2013.

• The government’s Funding for Lending scheme (FLS) may find greater use among lenders as time goes on, according to Nicholas Wrigley, chairman of Persimmon PLC, a leading residential housing developer (there are those who disagree with this, but time will tell).

The Guardian reported also in February 2013 that house sales are on the rise, according to the Royal Institution of Chartered Surveyors (RICS). But the organisation warms that the recovery is fragile and remains uninviting to first-time buyers.

Other means by which housing construction can commence to meet the growing UK population is for builders to elect to construct to-let housing where it is needed most. With so many young families looking for space, renting is increasing while home ownership is on the decline. “Triple dip-induced paranoia appears to be stalking the market, with many would-be buyers in the family sector choosing to rent for the time being,” said the principal of a Wakefield-based estate agency.

Another agent in Maidenhead, Berkshire, observed, “Buy-to-let investors are coming back to the market noticeably.” The Guardian reports that in the fourth quarter of 2012 that buy-to-let mortgage loans reached a 16 per cent growth over 2011, constituting 13 per cent of all mortgages granted last year. Building societies (BSAs), mutually owned by members who historically encourage individual home ownership, are increasingly extending loans instead to landlords; this is due to both demand factors and because higher fees from buy-to-let customers net better revenues for those societies.

It appears that investors in strategic land and housing development are exploring various means by which to increase housing stock and achieve asset growth in the process. Before embarking on such an investment, individuals should work with a personal financial advisor who can weigh risks against alternative investments in a holistic manner.

Total Views: 107Word Count: 666See All articles From Author

Investing / Finance Articles

1. How Bad Credit Loans Work For Better Financial Solutions In The Uk?
Author: Sara James

2. The Free Forex Robot Minimize Risk And Maximize Profits In The Forex Market
Author: johnsyanol

3. How The Internet Has Made Money Transfer To India Simple?
Author: jack

4. What Are The Major Advantages Of Bill Discounting India?
Author: Marketfinanc

5. Best Home Loan Scheme 04433044488 Documents Required For Home Loan
Author: Loansa Assit

6. Algotrade Can Help You Gain Consistent Returns On Forex Trading
Author: johnsyanol

7. Did You File Itr For Financial Year 2016-17?
Author: Did You File ITR For Financial Year 2016-17? India

8. The Advantages And Disadvantages Of Life Insurance
Author: Sushant ingh

9. Important Aspects Of Banking
Author: Sushant Singh

10. Are You In Need Of Monetary Help For Business Establishment?
Author: John Bairstow

11. Borrowing Commercial Loan Is A Secure Way For Business Owners
Author: John Bairstow

12. The Race To Transform Yourself Into A Profitable Forex Trader
Author: John Arnold

13. House Construction Loan For Bkhata Property Apply 9964563600
Author: House Construction Loan for Bkhata

14. Gst Impact On Mutual Fund Market
Author: Investment

15. Klse Market Understanding Before Investing
Author: Multi management and future solutions

Login To Account
Login Email:
Forgot Password?
New User?
Sign Up Newsletter
Email Address: