Lending institutions tightened up procedures and started to asses affordability, and check proof of earnings. OK, it's a bit more complex but that's essentially true.Īnyway… back to today. Inter-bank lending dried up because they didn’t trust each others balance sheets, and some banks collapsed. Anyway… long story short, the investments started to be viewed as risky because they had given mortgages to people who couldn’t afford them had interest rates risen. Banks had an easy attitude towards risk because they were grouping mortgages together and selling as a ‘security’. House prices were in a rapidly inflating bubble and large gains could be made, so it was enticing to buy multiple properties to rent out. This undoubtedly contributed towards the property boom and subsequent crash of 2008. There was a time you could ‘self certify’ earnings and easily get a loan towards a house purchase. The days of submitting fake payslips for a mortgage application are well behind us.
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