Mortgages were invented to allow people to purchase homes for their families and manage to gain some real estate that will remain for their offspring as financial security and asset. Having real estate used to be the best form of investment, moreover, the more houses you owned, the richer you were. Unfortunately, such times are over and people can generally not afford to purchase prime real estate and successfully repay such loans.
Real estate prices are high in areas where people would like to live and which are regarded as popular. Urban areas are deemed the most desirable and therefore the highest prices can sometimes be found within city limits. On the other hand prime rural real estate can reach high prices as well, but generally such higher prices are because of the large included land ownership and mansion-like building extravaganzas.
Ever since the 2007/08 world financial crisis, people are reluctant to enter into mortgages, because plenty of people in the US, but also abroad, suddenly defaulted on their loans without a fault of their own. While every single person that takes out a mortgage is assured that the purchased item is secure and safe, as long as the client is paying off the rates in time, what happens if the bank goes bust and the mortgage’s promissory note becomes a financial, bankable item that can be used to repay bank’s own debts.
For that very reason, people who could afford such a mortgage were not inclined to engage into such a risky investment and chose to pay stable rents and remain in good standing. Banks and mortgage lending entities significantly lowered the offers and provided profitable conditions, so that after a while people dared to take a chance despite the recent scare. However, the mortgage market is far from having recuperated, and people will most likely never again trust banks fully.
Fortunately for the European Union, most of the local banks did not depend on US American financial stability to rebound, but nevertheless, poorer countries were hit harder than the more wealthy ones. In any case the mortgage market is currently on an upswing, but people are still reluctant to risk a mortgage. Entering a debt that is going to stay with you for a couple of decades is no small decision. It is made additionally hard by the Damocles’ sword hanging above the head of the mortgage taker. In the end, the existing mortgages will sufficiently stabilise the market even further, which with the current low APR rates and easier approval procedures will ultimately lead to new signings and new homeowners. The reluctance of prospective homeowners is therefore to be viewed as only temporary and the market will in due time recover sufficiently and reclaim the forefront position as the most secure and profitable type of loan as it used to be.