As to the report released on January 24, 2012, an end to the housing crisis is expected by Capital Economics this year. Loosening credit is one of its reasons.
The average credit score necessary to be able to acquire a mortgage loan is 700 according to the analytics firm. Although this is above the score necessary before the crisis, it conforms to the requirements a year ago.
Also, credit requirements were found by a Fed Senior Loan Officer Survey to be consistent with the earlier three quarters.
Not only did the market indicators point to a stabilization of mortgage lending standards, but also the loosening of credit availability.
Currently, sums of up to 3.5 times borrower earnings are being lent by banks. This is definitely higher than the 3.2 times borrower earnings during the crisis.
Also, a loose in loan-to-value ratios (LTV), which is denoted by Capital Economics “the clearest sign yet of an improvement in mortgage credit conditions”, is made by the banks.
In opposite of the low 74% stretched in the mid-2010, an 82% LTV is now lent by banks.
Although there is a loosening credit conditions, a number of potential homebuyers are still anxious about credit requirements. In fact of the matter is that Capital Economics stated that in November, the 8% of the contract cancellations were because the potential buyers were not qualified for a loan.
Also, Capital Economics mentioned that says “any improvement in credit conditions won’t be significant enough to generate actual house price gains,” and that a threat is posed by potential ramifications from the euro-zone to future credit availability.
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