Whenever there is a property boom, it becomes very much dog eat dog in the world of property purchasing. We see the worst of manners and selfish actions by buyers asnd sellers alike. It was seriously grim back in the 1980s when there had been the shock of the black Monday stock market failure in October 1987 and another in 1988. This was followed by failure of a major London bank which eventually caused the financial world to sit up and clean up their act. However it also made a difference to the flow of money for mortgages and there were more controls put in place. Prior to the crashes, it had got to the point where building societies were offering crazy deals – 100 percent morgages were two a penny but to make a product more competitive, they were also offering add-ons such as legal fees and extra incentives – many folk could apply for 125 percent of the purchase price, with no deposit needed. Needless to say, many parties got caught out when the buyer suddenly couldn’t pay their mortgage. But not bad enough to stop the sudden boom in ‘buy to let’ which had not been a popular product prior to the 1990s. With this new scheme being rolled out, it allowed folk to start their own property portfolios by buying one small flat, then be able to borrow another substantial sum by remortgaging on the first flat to buy another, and doing this multiple times. Young entrepreneurs starting going mad and buying on a chain system, borrowing from Peter to pay Paul. When one of the major financial crashes occured, there were loads of young business folk – mostly male, who had 30+ properties in their chain – all tenanted, raking in fantastic rents. Then suddenly it just needed a couple of the 30 tenants to default on their rental payments and the chains would be broken and chaos reigned as owner at the top – let’s call him Mr. Big, suddenly caught a very big cold if he didn’t have enough coming in to pay the two or three mortgage payments.
One positive outcome was the gradual work towards cutting out money laundering. Every substantial purchase is much more strictly controlled. This is from any source – a large bid on an auction item has to be cleared to ensure the buyer is using completely legal money. The same goes for mortgages for any property and in fact, just for renting. You can’t just slip the landlord’s mum £30 to hold the flat until you came up with the rest of the money! Landlords are bound by law to hold tenant deposits in a legally bound holding deposit for the entirety of the tenancy. Obviousy if the tenant has crashed the property at the final inspection, the deposit is forfeited by the tenant, but it is supposed to be done cleanly and above board.