Northern Rock is poised to launch a range of mortgages offering up to 90 per cent of a property’s value, marking the nationalised bank’s return to riskier lending three years after its collapse and government bail-out….
Northern Rock’s aggressive boom-time lending practices, including the Together mortgage that offered borrowers up to 125 per cent of their property value, caused one of the most high-profile failures of the financial crisis.
Old habits die hard. Oh well.
What part of “This is what caused the problem to balloon in the first place” do they not understand?
here we go again. “Against stupidity, the gods themselves contend in vain.” L
High Risk -> (‘High ROI’ if you win or ‘Somebody else left holding the bag, if you lose) (as I cover my wallet)
Bailouts made this behavior profitable. Why not do it again?
There is nothing intrinsically wrong or risky with offering 90-10 mortgages if the borrower can afford to pay the mortgage. The behavior by lenders which caused a bulk of the problems was their willingness to lend money which could not be repaid. So long as housing prices increased, however, there was no real punishment for the bad risk. As long as the bank in question verifies income and the payments fall into the low 30’s (preferably high 20’s) percent of income, this will work. In fact, it might begin to help stabilize prices in the housing market which could cause other lenders to begin investing in their neighborhoods as well.
Now, if on the other hand, the incomes cannot support the mortgages, this will simply be a “press rewind and play” experience for all of us!
Not to worry — they can depend on the State to take its citizens money and bail it out if need be.