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An Unlikely New Mortgage Market

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Much has been written about the sub prime mortgage crisis in the
US and even more has been said. Most analysts placed the blame
for the implosion in the credit market on the adverse credit
mortgage. This is a type of home loan that is issued to a
borrower with a less than impressive credit history and
financial resume. However there is another factor which may have
been overlooked. This same factor may be about to spur a
mortgage bonanza in the least likely of places - Africa.

In addition to issues billions of pounds of mortgages to people
who had little chance of repaying them, the increased liquidity
in the financial markets is mostly to blame for the current sub
prime crisis. Banks and other financial institutions were simply
too cashed up in the late 1990s and early 2000s and lowered
their lending standards accordingly. Lenders had so much money
they were almost forced to dream up new products to market to
home owners and first time buyers in a marketplace that was
already at full capacity.

This is why lenders eventually got to a stage in which they
began to approve adverse credit mortgage products to just about
anybody who applied. They weren't the only product available at
the time and although they may have been the trigger for the
collapse in the financial markets they were not the only
contributor.

This excessive liquidity is currently being experienced by
several of the biggest banks in sub-Saharan Africa. While this
market is tiny in comparison to Europe and the USA some of the
factors which were prevalent in those markets ten years ago are
emerging in several African nations today. This is opening up
the prospect that Africa may be about to experience a small boom
in their mortgage market.

Unlike the European and US markets, however, the African home
loan market is far from overcrowded. A minority of the
population have a bank account or use any type of banking
facility at all let alone have a mortgage. The home loan market
is exclusive and usually only available to the elite but there
is a growing middle class demographic with an appetite for home
ownership.

It is also unlikely that African banks will be developing
adverse credit mortgage products similar to their Western
counterparts. This is largely because many Africans simply do
not have a credit history and therefore do not have impairments
to their credit files. Instead, home loans are issued only to
workers who are paid a salary and who have stable jobs. It is
common in Africa for lenders to be paid their monthly mortgage
repayments directly from the borrower's employers instead of
from the borrower's bank accounts. This helps reduce risks to
the lenders and as a reward the borrowers are often granted
lower interest rates.

In the wake of the adverse credit mortgage crisis an unlikely
beneficiary may therefore be Africa as lenders are increasingly
looking for new markets to conquer for profit. It will be many
years before the Western home loan market are fully repaired so
it could be Africa's time to shine.

About the author: Michael Sterios
Submit your details to get expert Adverse Credit Mortgage advice from an independent mortgage advisor through www.adversecreditmortgagesource.co.uk today

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