Finding a secured home loan is becoming increasingly difficult in the UK leaving a large number of homeowners confused as to why they are unable to release equity in their properties. Back in 2007 it wasn't uncommon for lenders to offer second charge loans up to 100% or 125% of the property value and in some cases lending even higher amounts

The reason banks were able to lend money this way is because the rising property prices meant that if their client was to deault on their loan and start misssing payments, the bank would still be able to get their money back by selling the home. Easy money, right?

Wrong. The bubble burst in mid 2007 when US home owners started defaulting on their loans. The reason was that bank advisors were so interested in reaching their bonuses by supplying loans that they forgot to check whether the home owners could actually afford to make make the monthly repayments. These irresponsible loan advisors thought that an acceptable method for a client to repay their home loan was by cerdit card. Something had to give...

Now lenders are being encouraged to steer away from risky lending, namely with loans for the self employed with no proof of income (self certified loans), unusal consstruction properties (which may reduce in value fast), loans for people with a bad credit history (defaults, CCJ's, missed loan payments) and loans for people with little or no equity to release in their property.

The whole system has been built on trsut. The lender trusting the customer to repay their loans and the customer trusting that this property value will continue to rise allowing them to keep spending. Property prices did not continue to rise and now we are stuck in a downward spiral of debt.

HOW TO BEAT THE CREDIT CRUNCH AND RESTORE MARKET CONFIDENCE

The current efforts to restore market confidence including pumoping trillions into global markets is only a half solution. You can pump all the water into a pipe you want, but it wont flow until you turn the taps on. Let me explain...

There is a simple, logical solution to solving this situation and it is not one that can be solved without global government consensus. It is up to the authorities of the world to restore the trust.

First the governments pass legislation that all banks who want to continue to offer mortgages and loans must provide home owner loans up to 100% and no more than 100% of their property value, without limitation by employment status provided both the applicant has been a citizen for more than 10 years and EITHER the applicant has a proven track record of repaying debts OR the applicant can prove income is regular and is sufficient to cover all existing outgoings by a sufficient margin. There should be a maximum rate set on these loans of 12% over the national bank base rate. What happens next?

In the short term lenders will have to borrow a lot of money from the government..There is a price for freedom and it will be trillions.

With lending restored to home owners, people will begin to start attempting to profit from buy to lets again.. This will stir demand in the housing markets and force the value of property to rise. With a rising market the trust is restored, Suddenly the global banks will again see value in securitsing even 100% property value home owner loans. New specialist lenders will appear Cash flow is then returned to normal,

It;s both the fault of lenders and home owners that we are in this mess, but unforuantely in modern day life they now rely on each other for properity. The governments of the world must take a stance and restore the flow.