Would German values bring stablity to the housing market?
Credit binges and House Price booms followed by years of Cold Turkey just about sums up the volatility that has afflicted the UK market for the past couple of decades or more. This is in stark contrast to Germany where things have been much more stable. Could the answer lie in a different approach to mortgage lending? UK Lenders calculate Loan to Value ratios based on current market values whereas their German counterparts look at Mortgage Lending Value. This represents the value which throughout the entire life of the loan can probably be achieved for a property that is sold on the free market irrespective of temporary fluctuations which can be caused by speculative influences. By discounting the Boom/Bust factors you end up with more sustainable lending. Maybe the Germans have a point.
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