Experts Fear Loan Levels Won't Recover Despite Government Bail Out

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Fri, 17 Oct 2008

It is feared that mortgages and buy to let loans will fail to show signs of recovery in the near future, despite the government’s £37 billion bail out. With Gordon Brown’s Labour government currently propping up struggling financial institutions, banks agreed to a series of conditions in order to receive the huge bail out package. Amongst these conditions was an assurance from HBOS and the Royal Bank of Scotland that mortgages and buy to let loans would remain at the high levels experienced last year.

However, several of UK’s leading mortgage brokers have criticised the government for failing to perform a more thorough evaluation of the banks’ ability to fulfil the loan requirements. With the number of mortgages and buy to let loans available down by over 21 per cent on twelve months ago, there is significant scepticism as to whether the banks will be true to their word.

Should loan levels fail to recover to the agreed level, a significant rise in the number of Britons looking to rent is expected. With a lack of mortgages available to buy a home, there will be a knock-on increase in demand for property rentals. However, with buy to let loan availability also down, it is feared that there won’t be sufficient supply to meet the demand for rental properties .

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