Irresponsible Borrowers

MegaMiniMouse

There is a school-of-thought that blames house purchasers for the recent collapse in the property market.

How can that be true?

wymondham

not sure about the collapse, but definately the price rises. If they continue to pay silly money then that how much people will charge!

MegaMiniMouse

wymondham wrote: »

not sure about the collapse, but definately the price rises. If they continue to pay silly money then that how much people will charge!

Why would a purchaser pay more than was necessary?

ciano125

Because all the property programmes on TV told them it was such a great investment and they'd never lose money, it didn't really matter how much they spent as it would always be worth more, that and a certain someone saying that their government would put an end to boom and bust. The banks were quite happy to lend the money and they were stupid enough to take it all in.

Does that answer your question?!

darkblue_2

My personal opinion of the recent financial collapse was because bankers decided to give everyone on the Jeremy Kyle show a mortgage without reasoning that some people may not actually be able to afford repayments. Whose fault is that? As a buyer, you should probably know what you're getting yourself into. As the seller of a product, it's in the banks best interests to ensure they're lending responsibly to people who can afford repayments.

For too long, banks and purchasers reasoned that 'bricks and mortar can only increase in value'. Banks could get their money back if the customer defaulted by repo, so they didn't really care too much. Buyers thought they would be able to sell and recoup their losses if things got tough.

It's a split hand, in my view. Both parties in that position should have taken more precautions.

Now that we should be learning lessons, I think it's high time banks started going through proper income and expenditures for all mortgage customers and really explaining that interest rates may look as small at 2% as at 6%, but the difference can mean having your own home or losing your home.

StevieJ

ciano125 wrote: »

Because all the property programmes on TV told them it was such a great investment and they'd never lose money, it didn't really matter how much they spent as it would always be worth more, that and a certain someone saying that their government would put an end to boom and bust. The banks were quite happy to lend the money and they were stupid enough to take it all in.

Does that answer your question?!

Are you serious

MegaMiniMouse

So who decides what a property is worth?

treliac

MegaMiniMouse wrote: »

There is a school-of-thought that blames house purchasers for the recent collapse in the property market.

How can that be true?

Yeah, a good deal of blame must go to those who weren't actually house purchasers but were, in fact, only mortgage holders who had borrowed a sum of money (probably on an over-priced house) that they were unlikely ever to be able to pay back.

MegaMiniMouse

treliac wrote: »

Yeah, a good deal of blame must go to those who weren't actually house purchasers but were, in fact, only mortgage holders who had borrowed a sum of money (probably on an over-priced house) that they were unlikely ever to be able to pay back.

So who 'profits' from such a poor deal?

darkblue_2

MegaMiniMouse wrote: »

So who decides what a property is worth?

Previous sale prices and how the media are reporting the market's health, as far as I can see.

One person lowers the price of their house on a street for an easy sale and all of a sudden you can't get what you want for it because potential buyers think "that one went for £x - why isn't this one?".

The Mail runs a story that the stock markets have been served with an ASBO because of immigrants and swine flu - and equally people feel they should be expecting a bargain.

Exocet

darkblue wrote: »

...in the banks best interests to ensure they're lending responsibly to people who can afford repayments.

Yes, and no. I thought the new game in town was for the banks to sell the original mortgages, and then sell them on. They became sliced and diced with other loans, enabling bundles of frankly fairly dodgy lending to still retain an AAA rating. These parcels were sold on, and on, around the financial system.

That's one part of the game. The other part was easy money. Perfectly normal sane people could buy a BTL property with 0% down, building up hundreds of thousands in debt (er sorry BTL empire). Competing with these BTLers were FTBs forced or willing to take on silly multiples in order to buy their property before it rose out of range.

A pyramid ensued. A bubble. An investment craze. People were buying property off plan and flipping it before completion, and making tens of thousands. This couldn't go on forever. It stopped. The systems failed.

The shakeout is beginning.