Thursday, April 17, 2008

Playing musical chairs

My sister-in-law in the UK lost her job while we over there visiting last year. She was one of dozens of people working in the sub-prime mortgage area, which, as far as I could work out, found ways of getting the banks to give mortgages to bankrupts and other people with bad credit histories.
Of course the people paid through the nose for these bad credit loans, which were often for mortgages for 100% of the property. Sometimes banks would even give more than 100% of the property’s value. An absurd situation that was destined for a fall.
However, people are still able to access mortgages and loans and all manner of credit in spite of their past. Is this a good thing? It might be for someone who’s inadvertently fallen on hard times, and who’s struggling to get back on their feet. But as a general thing that’s available for all and sundry, I’m not so sure it’s healthy, and I suspect there will be many more tears before bedtime.
One site – whose logo is shown below – specialise in accessing a variety of ‘bad credit offers’ as they call them, and giving people the option of which one to go for. I guess it’s a way of doing business, but I feel concerned about it as a long term solution.

When I was young banks were very cautious about giving loans to people wanting to buy their first home. Getting a mortgage was a major undertaking. And then along came mortgage consultants and the like, and banks started falling head over heels to provide cheaper mortgages and bigger mortgages and mortgages with polka dots on. Suddenly the customers could do no wrong, and the banks couldn’t wait to give them money.
Now of course, with house prices falling again after a massive boom, some of these people are suffering because they’re having to repay mortgages on houses that have lost considerable value. It’s pretty scary really.
Don’t get me wrong, banks should be open about giving mortgages. That’s part of their core business. They should be as helpful as possible. But where they’ve gone wrong is encouraging people to mortgage themselves way over their heads, for homes that the people often can’t really afford.
Equally, many young people don’t want to start small and build up: they want top quality homes now. So the faults are on both sides, though perhaps not equally.
So what has all this got to do with music or the arts or anything creative? I guess you could say it's a form of playing musical chairs, or being creative with money that doesn't exist. If you were of a mind.
Post a Comment