Is anyone else hacked off at the greed of banks who've lent money to those who can't repay and are now causing economic meltdown????

[MrsMar]

all caused by greedy people cashing in when the housing market is good, and then freaking out when it's unstable

I know the markets usually recover, but what if they don't? Do we all have to take a hit because of someone else's greed?

[Pan]

there is nothing greedy about people wishing to own their own home.

The greed is with the banks. We live in a system based on greed. Banks are the greediest of them all.

[Pan]

which is clearly what you meant......

[unknownrebelbang]

Some people are greedy undoubtedly, but the blame here lies with the banks.

Tis DH's favourite rant of the moment.

[MrsMar]

No, agreed, nothing wrong with people wanting to own their own homes at all, but if it is beyond your means I don't think the banks should lend you the money. The banks have been lending money to people who can't possibly repay, lending up to 10 times their income on huge terms, just because the housing market was rising hugely. As soon as the housing market takes a dive, the banks foreclose and those people have to declare themselves bankrupt as they can't possibly afford to repay, esp if they are in negative equity. I say it's the banks should lend money responsibly... not be too greedy and think they can make a fast buck on a rapidly rising market.

[MrsMar]

It is what I meant Pan... the annoying thing is that in the global economy we all suffer now... shares are plummeting, has a terrible effect on pensions and anyone who's just about to retire has to possibly reconsider, just cos some greedy ceo 5,000 miles away thought he could make a fast buck....

Mind you I'm sure it's not just in the States where that happens, there are plenty of irresponsible mortgage lenders here...

[MrsMar]

I really didn't phrase my op very well did I? dur!

I have no argument with people wanting to better their lives, but with banks being irresponsible then passing their problems on to us... they should take the hit!

[Whooosh]

Selfishly,having booked a last minute hol to disney,I want to know thelikely impact on the $ vs £....

[mm22bys]

People have to take some personal responsibility too though, even though there is so much pressure out there to take on more debt than they can perhaps afford. Interest rates have been low for a long time - surely they should have realised that rates at some point would rise? (The 90s and the enormous interest rates then are not all that long ago...)

[wheresthehamster]

Isn't it only a problem if you want to sell though?
There's no reason that you can't afford the mortgage just because house prices drop unless you lose your job. You just have to stay where you are. (like us)

[JeremyVile]

In a similar but slightly off-topic note, I was very surprised to learn that personal loans issued by the high street banks are underwritten by The Bank of England etc.
For instance on a ?10,000 (ahve lost my pound sign?)loan, the bank will only be liable for ?1,000 should the lendee fail to repay - The BOE will deal with the rest.

No surprise then that more and more people are being given loans that are really unsuitable for their budgets.

The banks dont have that much to lose.

[MrsMar]

I agree that there should be some kind of responsibility from the individuals, but these people aren't economic experts and possibly aren't as aware that perhaps the market is likely to fail. I wouldn't be expected to make an estimate of my own insurance risk, that's why insurance companies employ risk assessors, so why should I as an individual be completely responsible for assessing the risk factors of the market before taking out a loan.

It's true these things only become an issue if you need to sell, but as interest rates rise, more people are forced to sell as they cannot afford to keep up payments, which is what has caused the problems in the States I think.

I know things are recovering now.. ftse is back above 6000 now, but how many more risks do these people have to take? What happens if one day, when our economy isn't so strong, that it just keeps on going down, we lost just about everything in the recession of the 90s, I don't fancy going back to that

[wheresthehamster]

Yes, I didn't think of interest rate rises because we only ever had a max mortgage of £60,000 and rate rises could be covered. On six-figure mortgages I see that even a small rate rise could be disasterous.

[Reallytired]

I think that there should be laws limiting the amount that banks are prepared to lend people. I would limit it to 3.5 times the income of the highest wage earner. (Ie. discount the lowest income if there is its a couple)

It is stupid that banks ever lent people 5 times their income. Having people prepared to borrrow that much pushes up the housing prices.

The cycle of boom and bust exists as much as ever.

[expatinscotland]

Don't people have a personal responsibility to borrow responsibly?

Sorry, I know banks are greedy, but they're a function of greedy people.

Anyone who borrowed that much over the limits based on pure speculation is just plain stupid and if it all goes tits up well then they have only themselves to blame.

Sometimes, in the game of life, you lose.

[mosschops30]

Banking is a business though just like lots of other things. We have friends who have bought massive houses they cant afford and pay interest only etc.
Yeah we'd like to do that too, but we'd never pay it back and we'd never own our house so whats the point.
People have to take some responsibility its like these people who moan that they were loaned 25k and cant pay it back ....er sorry what did you think it was a gift?

[prufrock]

tbh this is more of an issue in US than UK, because mortgage lenders there are not allowed to be at all flexible with borrowers. In the Uk, if you were having problems, most lenders would offer a payment holiday or longer term, as they know this si the best way to help you cope, and the best chance they have of getting all their money back.

in the US nowadays, mortgages are all rolled into pools and sold on as part fo CDO's, so 10 different banks could end up owning parts fo your loan, which means it is impossible for the original broker to be flexible with borrowers. So the curent US issues are teh fault of greedy banks, who tried to create a trading instrument on which they could make money out of Joe Average's mortgage. (And I say this as somebody who used to actually be involved in the trading of theses instruments - they are a horrible thing)

[wheresthehamster]

In 'the old days' when you could only borrow a max of 3 times ONE salary and had to have at least a 10% deposit, it was possible to find a two-bed place to buy. Now that's impossible so I suppose that's why people borrow more than they should and banks are happy to lend it. Just a vicious circle.

[MrsMar]

I didn't know that about the US mortgage market prufrock, that's very interesting. Does make the prospect of bad debt much more likely surely? but then I guess they offset that risk over higher gains by selling on sections of the debt to other lenders.

I do see the point about buyers having to be responsible in what they borrow... and yes I get annoyed too when someone borrows £25K and defaults and whinges about not having any money, but I'm starting to think the responsibility has to come from both sides. That sounds like some serious fence sitting doesn't it?

[whiskeyandbeer]

sorry but how can anyone be angry at the banks.they are not moral guardians,they are not their to protect us and as far as i know they are there to operate as a buisness. be hacked off at the people borrowing well beyiond their means. it's like people who give out about banks upping their overdraft or credit card limits. it's all part of the culture where people don't want to accept responsibility for their own actions so they blame the bank for their lack of will power.
if someone goes to the bank for a loan, the bank then tells them the conditions under which they will loan them the money (time period/interest rates etc). it is completely up to these people wether or not they accept the conditions.

[Reallytired]

If someone has problems then it is is easy for one lender to become relatively flexible. The problem comes if someone loses their job, suffers a divorce AND has credit card debits. People forget that if interest rates go up it affects ALL loans.

I would agree about personal responsiblity, but it affects us all when a family loses abolutely everything and ends up in a flea infested bed and breakfast funded by the tax payer. To make it worst the poor family has negative equity and are persuded for the debt before they have even had the chance to get back on their feet.

Sometimes the law should protect people from their own stupidity/ bad luck.

[MrsMar]

sorry whiskeyandbeer I do think the banks have a part to play in this too... If you were an insurer you wouldn't insure someone if they were high risk would you? Surely it's good business not to loan to people who are likely to default in the future. If they don't have any responsibility at all then why on earth do we have to produce payslips/bank statements etc when getting a mortgage. Surely they'd just take your word for it you earned enough?

[Ladymuck]

I guess I would also question how much of what you should have should be influenced by the stock market. People should be looking at a balanced portfolio rather than having it weighted against riskier investments. Are you really investing in individual companies and incidentally to that are taking a hit or are you looking for maximum investment return by investing in shares? And if so to what extent is that greedy?!

[MrsMar]

I'm no expert ladymuck but aren't the stock market problems a direct result of concerns about the US mortgage market? So while I understand about weighted risk, haven't the mortgage lenders created their own problems with over lending in the sub prime market?

[whiskeyandbeer]

if i was an insurer of course i would insure someone who is a high risk, it would mean i could charge them a great deal more.

"but it affects us all when a family loses abolutely everything and ends up in a flea infested bed and breakfast funded by the tax payer"

it does but i fail to see why a family ending up living on the tax payers money is of a greater concern to them than any other business unless they are a state run bank.
i just see no reason to blame a bank for making a service available to people who clearly want to avail of this service. if the bank thinks it will be profitable to them then they will give a loan, if they think they will lose money they do not. similarly the customer has to make a decision wether or not the terms are right for them, the bank can not be expected to act as though they are these peoples parents.
as long as the banks are breaking no laws then more power to them.

[MrsMar]

I still don't think it's right though... if you're selling any product you have a responsibilty when selling that product.