MARKET PROPERTY HAS BEGUN ITS DECLINE

SATURDAY'S Viewpoint refers to some banks lending money to people who didn't have the means to repay it. Some of these banks are here on the island.
IN 2005 I sold a small 2-bedroom flat to a young couple for 14'0000 euros. The pair couldn't raise a mere 1'000 euro deposit to seal the deal while their mortgage came through. On top of this, the loan was based on both of their pays plus that of a brother. The bank/agent/valuer “arranged” among themselves a 40-year loan based on 110 percent of the asking price so that the couple didn't even (couldn't?) have to provide funds for the legal costs.

SINCE they bought the apartment, interest rate increases have raised their monthly repayments some 200 euros. Last week a FOR SALE appeared.
IN days gone by, mortgage terms seemed written in stone. They were based on 2 ½ times the bread winners salary. Time was for a maximum of 25 years. Additionally a deposit was needed as the credit was limited to a maximum of 90 percent of the property's true value. Easy money has helped push prices up - 20 percent locally last year. This abuse of credit could not continue. These Sub Prime Loans (business talk), Ropy Deals (plain English) have caused tremors in the U.S. which have now spread to Northern Rock in the U.K. A downturn in the property market here has already started. Mike Lillico Playa de Palma