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.