Ultimate Guide To Credit Repair

Two pieces of news appear to dominate the news of late and the debating of these gets more strenuous by the day. The facts are that we find ourselves in the eye of the storm that is the credit crunch, and the average house price has soared to an unprecedented level.

That said are they inextricable linked and if so how?

Well first and foremost is the overvalued housing market. Any commodity, and the housing market is no different from any other market, is purely dictated by supply and demand. If there is a limited supply but a less limited demand then prices will rise and if there is a limited demand but and conversely unlimited supply then prices will fall. This is basic economics and what all capitalist systems are built upon.

So how can we translate this to the housing market? It is, in a nutshell, to do with the way mortgages have been arranged for the last ten years, in particular the wide use of self certification. This effectively allows you to declare how much you earn without verification. You can see how it could be easy to stretch the truth somewhat.

In the past, house prices were set by the amount of money borrowers were permitted to borrow based on their earnings. As an example, if prospective borrowers were only allowed to borrow 100,000 in a specific area, logic would dictate that house prices there would stay in and around that price. Otherwise, it would be impossible for the houses to be sold as people there could not afford them, unless they saved up a larger deposit to support the loan.

Self certification has in essence allowed people to borrow more and in turn that has influenced the overall housing market and forced prices up. This has resulted in the need for competing buyers to similarly certify their income and as you will have seen a cascading effect has taken place and prices have disproportionately risen.

And so on to the credit crunch. Well basically, this aggressive buying behavior has made it difficult for lenders to lend high loan values and has also meant that proof of income is compulsory. However, because of the sharp increase in prices, the average house price has been set very high with purchasers having no way to find the money to pay them.

As a result, the housing market is at a standstill as there is simply not enough money around to buy.

Unfortunately we are currently a nation of borrowers and not a nation of savers. Our long term hopes may only lie in our ability to become a nation of savers again and fund property purchase in a more traditional way of saving significant amounts of money and add that to a more relative mortgage borrowing and essentially live within our means.

As a qualified financial advisor and mortgage advisor you may think that I would not want this as this takes time and I would need business. This is not the case what I really want is not a buoyant mortgage market but a sustainable one and my suggestion above is probably the only way we are ever going to get to a point of a sustainable mortgage market