Credit crunch may benefit market

Posted: 01 Oct 2007 11:47:32 GMT

The global credit crunch may seem like bad news for homeowners now but it will benefit the housing market in the long run.

The global credit crunch may seem like bad news for homeowners now but it will benefit the housing market in the long run.

That is according to Savills, which says that something needed to be done to bring the market under control.

Problems began to emerge following the collapse of the US sub-prime mortgage market, which saw hundreds of thousands of borrowers default on their mortgage payments.

Now many sub-prime lenders have tightened their lending criteria as they fear running into financial difficulty but Savills says that this may be a good thing.

"Some of the attitudes towards risk are quite prohibitive at the moment, but we think those will loosen up over the coming months as stability returns to the market," said Jim Ward from the firm.

"We're anticipating that there will be much more sensible lending criteria both in terms of risk margin, but more noticeably in terms of loan to value and serviceability. Which is what the market needed, to be quite honest. It removes one of the risks of overheating.

"In a way this [credit squeeze] is a short, sharp shock to the markets, which may put it on a sound footing going forward," he added.

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