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The Lender from hell…is it the UK Government?

October 21st, 2008 by admin | Filed under Daily News, Debt, Global Credit Crisis, Loans.

Few could believe the facts and figures that spewed forth from the housing charity “Shelter” last week. The government is easily the most aggressive lender on the high street when it comes to kicking people out of their homes. As well as that delightful titbit, Northern Rock also has some of the worst savings rates and the highest mortgage rates! Who said the government couldn’t run a bank? They remind me of the infamous East End landlord of the 60’s, Peter Rachman. Is the government guilty of Rachmanism?

Not according to them they aren’t. (Shocker!) But the figures speak for themselves. In the three months to the end of September 2008, Northern Rock repossessed 4201 homes. This figure is higher than many other mortgage lenders and a 20% rise on the previous quarter.

So, should we immediately tar and feather the government for their uncaring attitude at this time? Well, not really. You see, the reason that the Northern Rock had to be saved in the first place was because its loan book was already very shaky. They lent out thousands of mortgagse at 100% and 125% of the value of the property and now that prices have started to come down, it should be no surprise that the mortgage holders are getting into difficulty and defaulting in droves. It isn’t that the government is being really mean and nasty to these borrowers; it’s that Northern Rock, which had to be rescued, has a far higher percentage of these borrowers than most other banks….hence the need to be nationalised.

The situation may yet get worse as the Rocks 2 year fixed rate comes to an end on the 31st of October and members are moved onto the 7.34% variable rate from the fixed rate of 3.99%. That’s not only going to hurt them as well as taxpayers, but property prices will come under increased pressure from the likely defaults and repossessions that will arise from this. Assume the crash position.

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