The Real Culprits?

I do not think it reasonable to think that if a financial institution is willing to lend you can reasonable assume you will be OK.

Everybody must make their own decisions about how much they think they can borrow. Ever since we took out our first mortgage in the late 1960s mortgage lenders have always been prepared to lend us more than we were asking for. But every time we moved house we carefully calculated how much we could afford to borrow and ignored offers to lend us more than that amount.

I understand the pressure on first time house buyers to stretch themselves beyond their limits because they want to get their foot on the housing ladder before prices increase beyond their reach, but even then they should be realistic about what they can afford.

It is too easy for people to shrug off their own responsibility for the messes they get into by blaming the banks, the credit card companies, etc etc. But unless a person is mentally incapable of reaching decisions they have a duty to consider every decision they make and not be seduced by the blandishments of sellers, whether selling financial products, cars or clothes. Many millions of households and individuals do this quite successfully already, it is not an unreasonable demand to make.

Salespeople with bonuses/commissions to make versus financially-naive borrowers. Hm.....
How lovely it would be if everybody was clever, sensible, oranised, financially-savvy. Unfortunately they are not, but does that give the banks, etc. the right to mis-sell products to them?
One newspaper has printed the script that SEE salesmen had to use to bamboozle customers.
Yes, wealth creation is essential, but surely it can be done fairly and ethically and without ripping off the vulnerable.
I ran my own business, paid my staff well above the normal rates and charged very reasonable fees to clients. I didn't make a fortune, but I had happy staff and happy clients and a good conscience.
Nothing excuses the cynicism of big business and those in political power who defend the excesses.

Of course it does not - but many young people want it all, and they want it now. My daughter is very intelligent, well educated and very hard working - and nobody ever forced her to take a mortgage over her head, nor buy spanking leather furniture, large flat screen tvon % interest, etc. But the expectations of many, too many, youngsters are in line with Hello magazine, etc- whereas we used to make do. We made a lot of our furniture when we got married, had second hand prams and kitchen tables, etc, and slowly built up. I can assure you that every school in the land makes sure they teach about loans, interests, compound interests, etc - and that many of the youngsters who get into debt know exactly what they are doing, and were not 'mis-sold' anything by anybody - and have to take responsibility too - the greed of others also fed their greed and unreasonable demands.

There is no need for young couples to break the bank furnishing their homes. As I think I've said before, DS1 and his wife - both professionals on a decent salary - make copious use of EBay and charity shops for clothing, furnishings, appliances and bikes - anything but beds. Their house is comfortably furnished with good quality pieces, many of which have stood the test of time better than anything from Ikea is likely to do. Their first new TV was bought last year. They have a big second-hand caravan in which I have been invited to share several lovely holidays with them and will do so again this summer.

It is quite easy to avoid the scripted hard sell of professional sales people. If the initial contact is made by phone. Put the phone down. DH has been receiving calls from boiler rooms wanting to sell him fake shares for years. None of them get passed asking for Mr Peter FlicketyB. Nobody except boiler rooms call him Peter, he has always been called Pete.

The same with people on the doorstep. Just say you don't buy on the doorstop but if they have a leaflet you will have it - then shut the door.

As for financial products. DD has a simple mantra. If you do not understand clearly what the product is even after reading the small print say no and never reach a decision in the presence of the financial advisor, whether bank, building society or professional financial advisor. Go home and talk it through with a trusted friend or relative or think it through on your own before making a decision.

Nobody is perfect and we all make mistakes but take responsibility for your mistakes and don't just blame them on other people.

I bought shares in RBS because the service I got at my local branch was so good I wanted to invest in the company. Fortunately it wasn't a huge sum, but it has taught me to ALWAYS look at the wider picture and not invest in companies just because I like the product.

Years ago when we were first buying a house on a mortgage there was a formula by which the building society calculated the maximum amount of money you could borrow irrespective of the price of the house you wanted. It was directly linked to your basic salary - started off at two and a half times that of the the main earner ( usually the husband) and then started to include half the salary of the wife - in time this increased to once the salary of the wife. The two figures added together told you the money you could borrow - very easy and you could do it yourself before you went to the building society. The repayments on these calculations were thought to be the maximum you could comfortable afford to repay and still live adequately.
There were of course less people with a mortgage but these figures were almost written in stone and we did not have all the problems unfortunate people encountered in later years when able to borrow the percentage against the house price - bit ridiculous really when you think about it as the income you have is what will determine the amount you can pay back.
Aspiration is good but needing to have everything immediately and not make do for a while has been the shredding of so many dreams. There are so many books, magazines, TV programmes and the like showing the latest fashions in house and clothing that the 'change everything and have new' has taken over. Personally I like things which have sort have grown comfy round me and sometimes I could cry when old favourites wear out and I hate needing to find out how the new TV, washing machine etc works.
I wonder what life will have to offer our young grandchildren however clever they are and however hard they work.

Of course there is no 'need' Anno, but there is an 'expectation' - same for foreign holidays, etc- that it is a 'right' and due- whatever the consequences.

Very proud of our daughter who is working so hard to bring things around. She will work day in, day out, 7 days a week - to get herself back on her feet, like the little red hen. She could have given up - but never has, and never expected others to pick up her tab.

Most people these days worship money far too much. And I'm not talking about the ones who haven't got much. I'm talking about the comfortably off who want more, more, more.

Greed is at the heart of a lot of today's financial troubles.

#contentment

Contentment = true happiness. Greed = ongoing misery.

The average cost of a terraced house in the UK is £200,000. Many lenders are restricting mortgages to 70% - not of the sales price, but of their own valuation. So what chance have a couple on average salaries got of ever saving up a minimum of £60,000? So, no first time buyers and therefore no movement in the house chain.

Most of us on here are of an age when deposits could be as low as 5% and interest was 2.5%. I am sure most of us had to make do and mend, borrow furniture from our parents , buy secondhand, etc. Weren't we lucky?

My own daughter kept her last suite for 14 years, in spite of 6 children and dogs and cats. She is a very good manager and takes good care of all their belongings. So what? I really don't think anecdotal tales of how wonderful our children are has any bearing on the culpability of the banks and building societies.

So, borrowers should not have asked for so much. They were naive and possibly trusted the professionals too easily. I cannot see how that makes it any less monstrous that the lenders who made so much money have escaped any personal punishment. That is like blaming somebody who leaves a window open for any subsequent burglary. Yes, they were careless, but does that mean the burglar is any less culpable?

Most of us probably also remember interest at 14% too Greatnan. I am sorry to say that 2.5% never figured in my mortgages.

You're so young.....
I well remember the total chaos in 1988 when Nigel Lawson announced in his April budget that MIRAS (Mortgage Interest Relief at Source) would cease to be allowed to both borrowers in August. Naturally, there was a mad scramble to get mortgages whilst double interest relief was still available - employers were begged to lie about wages, house prices soared. Shortly after it was announced that interest was going up to 15%.
Tens of thousands of new home owners found themselves with negative equity and mortgage repayments that had risen beyond their means to pay. Some tried to give back the keys to the Building Society but found that they were still liable for the full loan. They lost everything. I am sure many people will say it was their own fault.

If I am being kind, I will say it was pure stupidity on Lawson's part. If I am in my cynical mood, I would ask who benefited from the rise in house prices.

I remember

Greatnan I was trying to remember what it was that caused the massive housing boom back in Thatcher's time - thank you - it was MIRAS. We had just moved to London from the north when that happened. The price of houses was going up practically every day. Luckily, we didn't buy right at the top of the market, but people who did then saw the value plummet. That was OK if they didn't have to move - they just sat it out in negative equity for a few years - but for those, like a work colleague of mine, that did have to sell (moving for work, broken relationships, etc. etc.), it was a nightmare.

The media often presents rising house prices as a good thing. Those who have bought feel happy that their "asset" is increasing in value, but unless you are going to sell your house and move to a much cheaper area, there is really no benefit in house prices rising year on year. All it does is make it more difficult for people to make their first purchase and everyone's liability for stamp duty increases too.

Financial institutions didn't really care that the transactions they were allowing were unsustainable, because they were making money from them, and when everything went pear shaped the institutions were just bailed out with taxpayers' money.

Being discussed on the Big Question now.