Following my recent post on the Government’s urging banks to help reckless (sorry, ‘hard-pressed’) borrowers, a reader alerted me to this excellent article from Vince Cable of the Liberal Democrats in The Independent pointing out that banks played their part in pumping up prices:
British banks, in particular, lent too much, too quickly, too carelessly, based largely on the optimistic but irrational belief that house prices can only increase and never fall.
[…] Banks and their executives are rightly excoriated for their cynicism in offloading risk and losses on to the taxpayer while pocketing large profits and bonuses. But they are correct to say that there are willing borrowers as well as reckless lenders. Much of the lending boom has been based on property and the belief that houses are not just our homes but the main source of family wealth: a pension, a bank account and a dwelling rolled into one.
The Government’s emergency package is at least partly designed to stop house prices finding a more sustainable level: a costly and ultimately fruitless objective.
If you’re new here, read my post urging the Government to leave house prices to fall to sensible levels, and see how housing is over-priced, relative to rent.
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In the near to mid term I don’t see any of this having any effect on the mortgage market in Britain.
I wouldn’t buy at this time unless I absolutely had to, and it’s getting more and more difficult for people with clean credit records to get finance for a home. So even if demand’s there, not having access to finance will prevent people from buying and eventually prices will probably fall.
BTW like your blog, I was wondering if I could use part of your disclaimer on my website. I’ve been looking for a comprehensive, well-written one and I think yours is just that
Thanks
Tannage
Another interesting point to note is that as people come off 100% mortgages, they’re finding no equity in their home to go onto a more competitive mortgage. I think some of the Government rhetoric is probably to try to mitigate this, although there’s a strong element of horses and stable doors about it.
(BTW Tannage, have emailed you about the disclaimer)