Confidence needs to improve so that our financial economy can improve!
Since the credit crunch obtaining finance has been much more difficult than it had been previously. This is because investment in the money markets decreased considerably because huge sums of money were lost due to bad debts from lending.
To try and prevent this from happening again the banks and other finance institutions introduced stricter lending criteria, which combined with the fact that the lenders have less money to lend, has made borrowing more difficult and also generally more expensive. This has particularly hit the mortgage markets making it more difficult for people to obtain mortgages to move home and particularly noticeable to buy their first home, as first time buyers have been hit hard mainly due to the requirement for larger deposits.
Commercial mortgages have also been more difficult to obtain along with other secured borrowing.
However, bridging finance has increased considerably over the last couple of years. This has a lot to do with the problems previously mentioned, which has forced people to take advantage of the more flexible underwriting offered through bridging loans. The higher deposits required for many types of mortgage due to lower loan to values has seen bridging loans being used to raise additional funds to bridge gaps in available deposits.
Bridging loans have also been used to secure deals that would have normally been financed through a business’s normal banking facilities. Due to the tighter underwriting, problems may arise that wouldn’t have prior to the credit crunch, forcing customers to look else where for finance.
Despite the slower economy bridging finance has seen a large increase in lending, what we need now is an improvement in the economy so that banks and investors can become more confident and start money flowing again.
When there is confidence people spend money, which in turn is spent and so on. When people lose confidence money is held on to, which stops the cycle. One of the main problems facing the large economies at present is China’s reluctance to spend the huge sums of money that they have accumulated over recent years. China are looking at the problem, because they can help provide a boost to the World’s economy by spending or releasing some of this money that they have acquired. This is also in China’s interest because by boosting the World’s economy people will be able to continue to buy goods from China. A slower World economy will also affect China, so they need to be confident and spend some of this money.
Such actions will surely help to improve confidence and see lending criteria relax and finance deals improve.