Although gold dust is precious, when it gets in your eyes it obstructs your vision. -Â Hsi-Tang
Economists stated that the main trigger for the financial crisis of 2008 was the issuance of mortgages that did not require down payments. Â The ease at which one could get mortgages in the past is what drove housing prices to unsustainable levels. Post-crisis, all banks vowed to end the practice forever, or that is what they wanted everyone to believe. Â Â
When the credit markets froze, we openly stated that the first sign that banks were getting ready to lower the bar again would come in the form of zero percent balance transfer offers that had all but vanished after 2008. Â A few years after 2008, banks started to mail these offers out, and now everywhere you look you can find 0% Â balance transfer offers ranging from 12 months to 18 months. Â The next step after that would be for banks to lower the 20% down payment required to something much lower. Currently, Bank of America (BAC) and a few other banks are offering 3% down mortgages. Â
Now Barclays Bank (BCS) has become the first British bank to turn back the hands of time; it has started to issue 0% down mortgages under a program called “family springboardâ€.  There is, however, one small difference. In this instance, a parent would put 10% of the down payment into an account. If payments are made in a timely fashion, this amount is returned in three years with interest.
In the US we like to do things bigger and better than everyone, so it is just a matter of time before this type of mortgage debuts here. As we have stated many times in the past, every bull market ends on a euphoric note; to get to this level the small player also needs to have easy access to hot money. So far this access has been restricted to the large corporations and the very rich. However, we feel that it is just a matter of time before the spigots will be opened to the small players. The first sign of this will be the debut of the 0% mortgage. Â
