Monday, 20 October 2008

Nationalised banks and repossessions

As I understand the situation, we currently have in this country a mix of nationalised, part nationalised and non nationalised banks. Oh, and to make things even more complicated, some of our banks like HSBC are no longer British owned. Alistair Darling and his colleagues have been talking about the rescued banks operating at arm's length from the government however you want to interpret that phrase. Over the coming weeks and months we will hear more and more about the state owned banks and the dreaded 'R word' - Repossessions. Already there is publicity about the repossessions that Northern Rock is enacting: unsurprisingly with their past 125% mortgages (to be strictly accurate a combination of mortgage and loan taken out together) some of their borrowers are particularly at risk. So now we have government minister Yvette Cooper trying to put some pressure on banks and building societies to try and rein in the number of repossessions and see if other solutions are possible. The thing is that the government are having an increasing problem in this area - the perception by the public will be that we the owners of Northern Rock are doing the repossessing and they won't quite believe the arm's length description.

Let's put ourselves in the shoes of the lenders for a moment. With increasing worries about security of employment and house prices continuing to plummet it's not too surprising that these lenders are getting so jittery and choosing the repo option. Apart from death and divorce I would think that repossession must be one of the most traumatic events to touch one's life. Even after the repossession takes place (and there is going to be a degree of time lag in this process) the lender will typically try and auction the property off. By that time the value of the property will have dropped further and there is no guarantee that it can make its reserve price. In a nutshell the repossession system isn't good for any party. I don't remember how all this worked out when a similar situation occurred under the Conservatives in the nineties, but this time it's the bailing out of lenders that's added a complication. Expect the media to turn their attention to this subject more and more.

I think that last Saturday was the third successive occasion when the 'Western Morning News' incorporated a thinner property supplement, just 32 pages again. Bradleys, who seem to be leading the way on incentives, are inviting buyers to visit their Launceston office within a 4 hour time slot next Saturday and here I'm quoting directly "many of our properties have special incentives available for sales agreed on the day, ranging from car incentives, holiday vouchers, cash back, solicitor fees and stamp duty paid." Reading between the lines potential purchasers would have to decide this week whether to go ahead on a purchase if they want to avail themselves of one of these incentives. Personally I would loathe to be under that sort of pressure to buy a home; there is always the prospect that a potential buyer would make a decision they will regret later just to avail themselves of apparently 'something for nothing'. For me the very serious matter of purchasing a property shouldn't be distracted by these giveaways, but of course I undertand why it is starting to happen in a bigger way.

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