GMAC pulls out from the German property market

GMAC Financial Services will pull its residential lending business from Germany. According to lender, they will not raise rates as other lenders are because of credit crunch there.

GMAC Financial Services will freeze lending on new residential property in Germany. The freeze believed to be temporary, for between four and six months. The company believes it is necessary due to the difficulties of borrowers to qualify for refinancing their properties here.

GMAC said that the move was necessary to combat the turmoil in the debt market that has caused it to be difficult to refinance house loans here. In addition, they said they would not raise interest rates as other lenders had because of the market crisis, also a reason why they will pull out of the market.

The move is considered to be because of the credit crunch happening worldwide, mainly due to the foreclosure/default rates of mortgages skyrocketing throughout the US. GMAC offers funding for residential properties in Germany up to the tune of €500,000 to private borrowers. Often, they provide high risk and high loan to value properties up to 110 per cent of the value of the property.

Other lenders offering services in Germany include the large banks of Topimmo of Deutsche Bank and ABN AMRO. Both still will operate and provide lending services in Germany, but many require higher interest rates and restrictive terms to borrowers, making it more difficult for homeowners here to refinance or to purchase property.

Germany did have a shaky year last year with a drop in growth in both their property market and their economy. According to Angela Merkel, Chancellor, the problem is not a need for tax cuts, but rather a method to overcome the transparency of the country in international financial markets.

Also reported is that the country as a whole has not been hurt by the credit crunch mainly because as a rule Germans do not depend on credit usages and credit used by companies is rather low