Where is the recourse for lenders who fueled a housing bubble, forcing borrowers to place themselves at risk in order to purchase a property to satisfy the circus of home ownership?
Peer pressure to get on the housing market which is massively overvalued thanks to the availability of credit in the boom years, has left ordinary families faced with the dilemma of getting a mortgage and entering a high risk contract that could see them losing everything.
Whereas entering into a mortgage contract 16 years ago and paying it off was an achievable endeavor,Â (due to the fact that you could only get a mortgage if you met the lenders strict criteria and house prices were considerably lower than today) nowadays there is much more financial and peer pressure placed on the family to execute such a risky transaction.
The onus is on the borrower to fulfill and meet the terms of the contractÂ as it always has been, but now with the higher risk involved and some lenders looking at between 30% and 60% of their borrowers in arrears, the mortgages agreed by lenders start to appear quite impractical to issue and therefore reckless.
The chairman of the Council of Mortgage Lenders accusation that the Financial Services Authority view lenders as "Drug dealers" seems a bit harsh in my opinion. Because without the lenders agreement to approve mortgages, which are obviously impossible to service (as has been demonstrated by the high percentage of borrowers in arrears) the risk would be considerably lower. Also, property prices would then be lower meaning what mortgages were approved would be serviceable.
The only other option is a drastically lower percentage of home owners which I am sure the Council of Mortgage Lenders would not be too happy aboutÂ thanks to the lower transactions, unless there is a full scale housing crash with house prices falling back into line with wages and borrowing placed at a low risk level.