Negative Equity. Should The Nationalised Banks Accept Some Of The Blame And Should They Be Compelled To Pay?

It’s a phrase that seems specifically intended to turn an absolute disaster into a mindless platitude. The recent phenomenon of Negative Equity can mean despair and worry for many hundreds , but has only really been around for the last few tens of years. When we buy financial investments there is usually a sort of health warning attached which says words to the effect of “investments can go up and down”, but when We Buy Homes nobody seems to be obliged to give out such a warning.

We Buy Houses to live in, or so we assume , but they are also the largest investment we ever make , generally , and as such there is a pretty well free market that eases the trading of property and it most certainly does go up and down, even to the point where the price of a property could well be less than a mortgage that a property owner has taken out against it. Negative equity in motion .

But this round of negative equity has an especially rancid taste about it. Many thousands of people were lured into putting down little or no deposits against their properties by unbelievably attractive packages offered by a few financial institutions . These were widely taken up mainly by people in the United States who really should not have been offered loans at all.

If at the moment I was to Sell My House I am in the fortunate position that I would have a substantial amount of equity with me. I am not currently looking to Sell My House but I am conscious that my circumstances may change in the future therefore I take my home owner responsibilities seriously. But I also think my lender should take some responsibility for what happens to my home. After all they have invested very substantially in it. They should not be permitted to declare that when We Buy Houses we must take all the responsibility for what happens if circumstances change and we get into difficulties.

When We Buy Homes with a loan it should be perfectly clear to the lending institution what the costs are if the economic climate changes and the home buyer is not able to make the monthly payments to repay the loans. They should not be allowed to completely ditch their responsibilities when a homeowner goes through difficulties . And they most definitely should not have been bailed out by a weak government with such an unnatural love with business that they have been prepared to shore up institutions at the expense of the taxpayer, when they could have intervened in a myriad of different ways which would have benefitted both the homeowner and the taxpayer and would have alleviated the effects of the house price fall allowing more people to stay in their homes.

It’s pretty obvious that this will not be the last house price crash. Prices will go up and down again. Lenders will over lend, not check buyers’ financial capabilities, buy up worthless bonds etc all over again. Why do I think this? Because no attempt has been made to control the way the whole system operates. The new Lib Con government has not made any real noises about changing the way the house buying system operates as far as financing house purchases goes.

The nationalised building societies are no more responsible for their part in the home purchase transaction process than they were before . Their only real answers so far have been to make house purchases more difficult and financially awkward for everyone whilst allowing repossessions to mushroom . And without a determined government that is prepared to legislate this boom and bust cycle is bound to re occur over again.