Are The Banks Relaxing The Credit Noose?

 

Capital Economics expects the housing crisis to end this year, according to a recent report. One of the main reasons: loosening credit.

The analytics firm notes the average credit score required to attain a mortgage loan is 700. While this is higher than scores required prior to the crisis, it is consistent  with requirements one year ago.

Additionally, a Fed Senior Loan Officer Survey found credit requirements in the fourth quarter were consistent with the past three quarters.

However, other market indicators point not just to a stabilization of mortgage lending standards, but also a loosening of credit availability.

Banks are now lending amounts up to 3.5 times borrower earnings. This is up from a low during the crisis of 3.2 times borrower earnings.

Banks are also loosening loan-to-value ratios (LTV), which Capital Economics denotes “the clearest sign yet of an improvement in mortgage credit conditions.”

In contrast to a low of 74 percent reached in mid-2010, banks are now lending at 82 percent LTV.

While credit conditions may have loosened slightly, some potential homebuyers are still struggling with credit requirements. In fact, Capital Economics points out that in November 8 percent of contract cancellations were the result of a potential buyer not qualifying for a loan.

Additionally, Capital Economics says “any improvement in credit conditions won’t be significant enough to generation actual house price gains,” and potential ramifications from the euro-zone pose a threat to future credit availability.

All in all, better news for home owners. House prices have stabilized and, combined with historically low interest rates, now is a great the time to buy a home.

 

Source: DSNews.com

Information contained herein is deemed reliable but is not guaranteed and should be independently verified. 
Wendy Dixon Fog specializes in New Canaan real estate, a top listing and top selling agent assisting buyers and sellers throughout the area. access the MLS, receive a free home evaluation, and subscribe to daily home listings updates . call or text 203.979-6277, email wendy@wendyfog.com

About Wendy Fog

Wendy Dixon Fog is consistently a Top Selling and Listing Agent with Houlihan Lawrence Real Estate in New Canaan, Ct. To receive a free home evaluation, up to date property listings, or search for that perfect home in the MLS please email wendy@wendyfog.com or call/text at 203-979-6277.

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