Economy slowdown catches up with high earners home loans

Economy slowdown catches up with high earners home loans.
From Mumbai to London via New York reports of high earners defaulting or struggling on their home loans are hitting the news. High earners have as a group generally soared crisis with little damage to their lifestyle than maybe having to quit the golf club for some time are finally feeling the pinch of our current economic crisis. Reports tell of high flyers having to take wage cuts or accept lower paying jobs causing their mortgage to represent ever larger percentages of their wages. Home loans with price tags of 50% of the homeowner wages are no longer atypical. This has caused more and more homeowners to default on their mortgages causing the mortgage portfolio of Banks and finance companies to struggle.
Historically non performing mortgages represented a very low percentage of Banks home loan and mortgage portfolios, maybe one percent in a typical bank of finance company. Currently however many banks and finance companies’ non-performing home loans and mortgages has increased to three and four percent of their mortgage and home loan portfolio. For banks and finance companies that were on the less conservative side of things when it came to lending are suffering an even higher percentage of non-performing mortgages in their home loan portfolio.
What if you are not a high earner? How does this affect you? What about people who have managed to keep their high paying jobs and are home loan and mortgage free?
As with all crisis there are heavy losers and big winners. The famous saying that the characters for crisis in Chinese include the character for opportunity is unfortunately incorrect or such is the opinion of an angry Chinese philologist I recently read. However this “myth” of crisis / opportunity relationship has been so popular because it is true. When things go terribly wrong for a lot of people quite a few tend to do very well out of it. The saying: “This economy needs a war” has been said so many times it is impossible to quote it to one person. Sufficient to say that the current economy is causing a lot of damage to most of us but is also opening opportunities for those in the right circumstances.

So how can you make a profit or at least benefit from this crisis?

- You need to have been conservative with borrowing in the past and have an excellent credit rating.
- You need to have a solid income and some collateral to appease the battered managers of Bank’s finance divisions.

If you have these two requirements and you are in the market of buying a house you could be in for a golden opportunity. Governments and Banks are thrashing their interest rates in an effort to pay their way out of the credit crisis. These incentives are specially designed to attract customers that have great credit rating and solid incomes which are the customers banks and finance companies are looking for.

Just to illustrate, if you are in the right circumstances you could get a 4% fixed interest refinance or new home loan and even lower if you go for variable interest rates.