The Citizens Advice charity has released a report which claims that sub-prime mortgage lenders are the most eager of mortgage lenders to claim repossesion of propety from morgagees who have been unable to keep up with their repayments. They suggest that many of these mortgages were established with the knowledge that the mortgagee would struggle to repay these loans. This is a similar situation to the one in the US financial markets that has led to the worldwide credit crunch.

“dubious advice from brokers, irresponsible lending decisions and aggressive arrears management by sub-prime lenders are driving the current increase in mortgage arrears” according to the report

I have long felt that all of the banks and mortgage lenders are rather too quick to jump on their borrowers in the event of late and defaulting payments. They all claim to help and support their borrowers when they are having difficulty paying their debts but the reality seems to be that they have little interest in working with their customers to overcome those difficulties. Some time ago I wrote about a series of articles on the BBC.co.uk website which was a diary of a lady who was attempting to get through a difficult financial period due to her having lost her employment, temporarily, through having a baby. The Banks were unsympathetic and very unhelpful even though she had every prospect of being able to pay all her outstanding debts in a matter of a few months.

It seems crazy that banks would not work with customers to get full repayment of their debts. It surely makes sense to work with the customer rather than doing their best to bankrupt the customer and end up with a settlement that is less than what could have been achieved by assisting their customers.

Their are legions of successful people who have rebuilt their lives after financial disaster. I have no doubt that when it comes to investing those millions they make they do remember which banks and creditors tried to help them when things were tough. We should all do that and avoid using banks and other lenders who when it comes to difficult times are unhelpful. None of us know when we might suddenly find ourselves in financial difficulty. The most common reasons are divorce, redundancy and ill health. None of those are by choice, nobody wants to suffer financial hardship but if we do we can reasonably ask that the bank that was so keen to lend us money when things were going well should be supportive and help us when we really need lenders to be understanding. It is in their interests as much as ours. Sadly as we have seen in the whole credit crunch debacle. Banks, in general, are run by a bunch of greedy, self-centred mega-bonus seeking idiots who cannot even work out simple sums on a calculator that a child would find simple to do.

Banks that genuinly want to work with their customers through the difficult times and not just through the easy times will have the opportunity to develop a lifetime customer and that seems to be in their interests. It seems odd that none of them seem to care about this.

Money Magic: Seven Simple Steps to True Financial Freedom (Quick Reads)

The Bank Rete setting committee of the Bank Of England decided to reduce the rate yesterday to 5.5%. Recent news supported the view that the economy may slow significantly in the future if the bank rate had remained unchanged.
Inflationary pressures do exist with food and fuel both having risen but it would seem the committee considered the risk of recession was threatening.

It is reported that up to 1.4 million homeowners will be coming off their fixed rate mortgages next year and many might have found the change in rates unmanageable. The cut is bound to be helpful to them and other mortgage holders. It may reduce some credit card and loan rates which will help most consumers but the main intention of this cut is very likely to help the high street shops and other businesses.

There have been many signs that consumer spending is slowing. Whether this rate cut will reverse that trend remains to be seen. The shock of realising how overloaded with debt they are, having suffered when the rates increased earlier this year may well leave consumers feeling they have reached a point where they feel they have quite enough debt.
Once you have had a scare it tends to make you more cautious in the future and the prospect of houses not being worth as much as we had hoped will make us all feel a little less wealthy in the coming year.

Money Magic: Seven Simple Steps to True Financial Freedom (Quick Reads)

Well, I don’t want to say I told you so, but I did. I can’t say I feel smug about that as it will be bad news for nearly all of us but it was inevitable. Regular readers of this blog will know I have been talking about house prices falling for some time and the figures are really building up to support that view.

The Halifax has released results suggesting that house prices in the UK fell by 1.1% last month. There had been previous suggestions that houde prices were slowing their rise but this figure for November 2007 pushes the three monthly average into a minus figure for the first time since 1996. This follows on from news that mortgage applications have collapsed to a three year low. Perhaps collapsed is not the right word but compared with recent years it is a very significant drop. The Halifax reports that it’s mortgage approvals in October were down 31% compared to October 2006. It may be a lot more people were going elsewhere for mortgages but the Halifax is the UK’s largest lender and these figures are further evidence that the buyers are fading away.

The problems caused by the credit crunch are making mortgages harder to get and those that are available are more expensive than they had been in the past. This makes it far harder for first time buyers to get on the mortage/housing ladder which in turn reduces the demand for property which then means that anyone wanting to sell to first timers has to reduce their price to attract the buyers. It has become a buyers market and the buyers hold the trump cards. They can walk away and find plenty of other properties.

The buy to let market has dropped off because the sums don’t add up so well now. Previously you could reckon on buying a property and letting it out. The rental income would cover the mortgage and you would get capital growth in the value of the property. This is no longer true. The interest on a Buy To Let mortgage is now likely to be highr than the rental income and, at the moment, there is a minus figure for capital growth.

When you also add to this scenario the huge personal debt that many people have built up over recent years on credit cards, personal loans and remortgages that are mostly requiring larger repayments because of interest rate rises we have a population that sees the value of their property diminishing while their repayments are increasing. Many people will be able to ignore this and carry on regardless but many will not. Those who have seen every house price rise as an opportunity to raise another remortgage to buy new cars, designer handbags or yet another giant tv will start to wonder how they can pay for all this and still maintain their lifestyles.

All this pressure on house prices will continue to build until house prices return to a realistic figure that relates the cost of houses with the cost of money and the average persons income. They have to get back to a more realistic position unless the credit industry or even the government come up with some imaginitive way to lend people more money that they will somehow be able to afford to repay over time. It is always a possibility that the government will try to do this. Rising house prices generally make for happy voters. Falling house prices have the reverse effect.

The bank rate setting committee is meeting as I write this. It will be interesting to see how they respond. It would seem likely that nervous of a collapse in consumer spending they will reduce the Bank Rate tomorrow.

Watch this space but keep your credit card under control.

Money Magic: Seven Simple Steps to True Financial Freedom (Quick Reads)