Housing markets in Britain may see a sharp decline because of a slowdown growth in the economy and an increase in costs for borrowing.
The result could have consequences for the economy in general, as well as personal wealth, which could be felt throughout the country for a long time.
A new strategy
Lenders are in a bind in recent times after the new British government released its economic plan that proved to be quite turbulent.
This is due to the fact that the sterling funding markets witnessed wild swings which determine the mortgage rates that are offered to homeowners.
The perception of wealth based on how much they value their home very closely.
According to the latest data from the government less than two-thirds of the homes in Britain comprising 24.7 million were owned by the owners.
It is estimated that there are 8.8 million houses that homeowners own on their own, and 6.8 million are owned by the help of a mortgage or loan.
In reality, some banks even went as far as not giving new customers mortgages, while some opted to raise the rates of repayment to higher levels.
This put millions of homeowners in a difficult spot as they were stretched too thin and many more found new mortgages impossible to afford.
Mortgage deals
Customers who are new to the market are receiving mortgage offers which have rates of 5 to 6% this is a significant increase from the typical 2percent that was experienced in the past five years.
The result is that the market for property in Britain could be a disaster down the road. Experts have suggested that this crisis could develop into a bigger problem than energy.
The reason is that, if house prices decrease, a massive number of homeowners would end up with the debt of more than their property.
The cost of an British house in 2009 been at 154,000 pounds however, it has risen to 292,000 pounds.
This is because of an insufficient supply of housing stock as well as low rates after the financial crisis in the world back in 2008/2009.
The country has seen a higher growth in the economy, and also increased consumer spending, however, everything would fall apart in the event that tax cuts were used to boost economic growth because it could increase the cost of borrowing.
Detected
In July the month of July, a Fitch Ratings study revealed how the UK was among the countries that was most vulnerable around the globe to an increase in the cost of borrowing.
This is because homeowners can accept high levels of debt to income and due to the fact that Britain has a higher percentage of loans with floating rates.
A recent study also revealed that for those who had their interest rate fixed, there were 1.3 million borrowers that would be at the expiration date of their fixed rate period in 2022.
The final rate of repayment will depend on the rise of interest rates originated by the Bank of England (BoE) as well as the changes in debt markets.
It is estimated that the cost for borrowing currently stands at 2.25 percent, but market analysts believe this will increase to 5.75 percent by the time 2023 comes around.
