Problems in Obtaining Mortgages

Credit is becoming more difficult to obtain because of the rise in the cost of inter-bank borrowing since last Autumn. This has led to a rise in the cost of money to borrowers. People on tracker mortgages won’t be affected. However people looking for new tracker mortgages will have to pay more. As the credit crunch continues the cost of borrowing will rise further. As a consequence lending criteria will get stricter and the loan to value ratio will fall. In Britain some of the lenders, such as First Direct, have stopped lending because of the demand for their products. This arose with people coming off fixed rates who were looking for attractive alternatives. First Direct became inundated with applications. It was a question of either increasing interest rates dramatically to discourage applicants or withdrawing loans to new customers to enable them to clear the backlog. However in Ireland the demand for residential mortgages is at its lowest in 14 years according to Central Bank statistics. This decline reflects the decline in house sales as shown by the recent figures published by Permanent TSB and ESRI. However these figures show that the rate of decline was not as sharp in January/February as it was in November/December. 

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