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Home reposessions are rising, and we’re all going to suffer

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We’ve all read the stories about rising house repossessions, as the people who over-stretched themselves to claw their way onto the property ladder ‘at any cost’ during the boom years suddenly realise that borrowing all that money to buy a property at a wildly inflated price probably wasn’t such a good idea after all. And it should come as no surprise to learn that around one in thirteen of repossessions over the past three months have involved Northern Rock customers, because the company’s ’strategy’ over the past decade has largely been based on lending huge sums of money to people without asking too many questions about whether they were able to pay it back. The Americans call this ’sub-prime’ lending but we don’t, mostly because the government/banking industry is still trying to claim that we don’t have a sub-prime problem in the UK and the best way to do that is to pretend that the whole sub-prime thing simply doesn’t exist on this side of the Atlantic.

Since Northern Rock is now essentially owned by the British taxpayer, it’s us who are going to foot the bill for this disaster. As well as the PR nightmare that comes from a government owned bank turfing unfortunate families out of their homes, we also have to face the fact that the properties being repossessed (in our name) are largely going to be worth considerably less than the value of the mortgage, in the current market they’re going to be very difficult to sell quickly, and they’re depreciating at around 1% per month. Remember – this is your money the government is burning. Both Northern Rock and the people it lent money to made some remarkably stupid decisions, and they’re all being baled out with public funds.

If the Liberal Democrats have their way, even more public money will be spent on keeping the property bubble inflated and baling out the stupid and greedy. The party’s Treasury spokesman has announced an interesting selection of policy ideas designed to stop the “downward spiral” in the housing market, such as allowing struggling homeowners to sell equity in their property to local authorities and paying rent on that portion of the property. This means that taxpayers money will be used to buy worthless assets (what good is 10% of a house to anybody?) and rescue people who’ve made poor financial decisions. Call us heartless, but we think the best way out of this mess is to let the downward spiral continue so that the market naturally corrects itself and everybody learns to be a bit more sensible when it comes to mortgages.

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