Mortgages Uncovered

It isn’t just the UK that has been hit hard by the ructions across the Atlantic because of America’s sub-prime mortgage crisis. Banks in Turkey have lost up to $50 billion since January as a direct result of foreign investors retreating from the region.

Granted that there are also home-grown economic tensions within Turkey that have also had an effect on this outcome, but it is frightening at just how much the outflow of foreign investors can result in such a sudden and steep decline in profitability for Turkish banks. These aren’t just any old investors of course, but ones who bought into banking stocks over the last decade and who are now selling those stocks like they are going out of fashion – which, in a sense, they are. The fluctuation in the world markets because of the US Sub-prime crisis has led to this en-masse selling, which is in turn creating a dramatic decline in banking stocks – a situation not helped by the banks’ consecutively high dividend issues which also drive away foreign investment.

Further exacerbating the plight of Turkey’s banks, Ahmet İyimaya, the head of the Justice Commission, has presented a draft bill to the Turkish Parliament for proposed caps to credit card interest rates, which has caused another plummet to bank stocks within the last week.

A consortium of banking interests has presented its concerns to the Turkish Parliament, but little progress has yet been made to sort out the problems they face.

As mentioned in a previous article, the buy to let sector in the housing market is perhaps the only area that has held firm, and even made some slight growth during this period of credit crunch. Although nothing is safe it seems. As pressure mounts on the economy it is possible that some tenants may find that they are unable to pay their rent on time and this would in turn up the pressure on property investors. Many of the buy to let companies or landlords with a chain of properties rely their earnings from existing properties to invest in new properties and for general maintenance. So if enough tenants are late with their rent this may have a knock on effect across a chain of properties and investments.

Beyond the buy to let sector, the buoyancy in house markets that the UK had witnessed for so many years has finally started to topple along with the country’s credit problems. More and more investors in the UK are moving out of property markets because of problems with finance and arranging loans for new purchases.

Whether all this results in the housing crisis some experts have been predicting remains to be seen, but one thing is certain, this situation is unlikely to improve as long as high rates and lender uncertainty continues to squeeze UK investors out of the property market.