Since the summer of 2008, there has been practically nothing but uncertainty and fear concerning the UK mortgage market. While financial analysts and politicians alike realize the determent that this fear is causing, they are having issues trying to turn those doubtful feelings and uncertainties into something positive that the financial community and consumers can hold onto.
The UK government injected billions of sterling pounds into the financial markets, by bailing out the banks whose liquidity levels were dramatically reduced due to values of housing prices dropping and by decreasing amounts of their deposits. Banks that were obligated to take the government help will be required to lend a certain amount of money to the tax payers. Unfortunately, those measures have not been set up, so an increase in lending has not yet taken effect. Eventually, though, the banks will sort themselves out and the government will force them to begin lending again. It is already happening in Ireland, and the UK is not far behind. The credit crisis will not turn around until banks are lending money to people who want to buy houses.
The injection from the government should also help those banks help the struggling consumers. It is very difficult for a bank to demand payment on a mortgage when just recently they almost collapsed themselves. Certain banks were forced to take help from the government, and the British government wants to make sure that the banks are helping their customers in these desperate times. The last thing a struggling bank needs is a bunch of overvalued homes on their books that they can not sell or get their money back on. Because of this, banks will be more willing to work with struggling home owners who are having issues making their mortgage payments.
Post injection, there has been little movement in the struggling mortgage market, but that is because both sides, banks and consumers, are very wary. Now that the credit crisis has had its first birthday, both consumers and banks are starting to gather more confidence and are beginning to look ahead. Banks are starting to lend again, albeit slowly and with very strict guidelines. Consumers are beginning to look into the property market, with the idea that we may have already hit rock bottom, and in order to get a deal, the time is now to purchase a credit crunch house.
Without a doubt, this has been a very difficult time for both businesses and consumers, but there are green shoots ahead to look forward to. Without the government injection, we can only wonder how much more chaos could have been caused, how many more banks and business would have been lost. Fortunately, the British government stepped in. How they did it and how much they gave will always be up for debate, and hindsight is 20/20, but they injected money when the banks needed it, and the majority of them are still around, which is cause to deem it a successful venture.
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