I know that there has been general discussion on this topic on other threads but I would be interested to hear some debate on the key issue of how the Banks will respond to the increased risk levels represented by a static/falling property market and higher interest rates.
Mortgage lending has been increasing by approx 33% annually over the past 4 years. An increasing portion of this rise has been the tendandcy of home owners to use equity release funding to cover shortfalls in discretionary personal spending such as holidays, new cars etc. In other words a larger portion of the population have been "lunching out" on their house. i.e. eating the equity.
I am old enough to have been involved in the banking crisis of the mid 80's when farming took a major hit and farmland prices hit a major low. The reaction of the banks was neither considered nor measured. They had no anticipation of the crisis and effectively panicked shutting up on new lending and agressively chasing defaulters.
My view is that none of todays bankers have learned any lessons from that time and are still riding on the wave that a crisis will never happen. Maybe they are right but if it does my view is that the Banks will again all act like lemmings and rather than taking a stance of controlled response we will see a panic situation which will effectively close down the easy credit option for the normal punter. Now instead of lunching on the family home many individuals will find the option closed and payback time will mean that repayment problems will quickly arise and create further panic with the banks. I may of course be completely wrong but I do see many of the signs now that were there in the eary 80's. Hopefully it won't happen.
Mortgage lending has been increasing by approx 33% annually over the past 4 years. An increasing portion of this rise has been the tendandcy of home owners to use equity release funding to cover shortfalls in discretionary personal spending such as holidays, new cars etc. In other words a larger portion of the population have been "lunching out" on their house. i.e. eating the equity.
I am old enough to have been involved in the banking crisis of the mid 80's when farming took a major hit and farmland prices hit a major low. The reaction of the banks was neither considered nor measured. They had no anticipation of the crisis and effectively panicked shutting up on new lending and agressively chasing defaulters.
My view is that none of todays bankers have learned any lessons from that time and are still riding on the wave that a crisis will never happen. Maybe they are right but if it does my view is that the Banks will again all act like lemmings and rather than taking a stance of controlled response we will see a panic situation which will effectively close down the easy credit option for the normal punter. Now instead of lunching on the family home many individuals will find the option closed and payback time will mean that repayment problems will quickly arise and create further panic with the banks. I may of course be completely wrong but I do see many of the signs now that were there in the eary 80's. Hopefully it won't happen.
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