In theory, the effort unveiled Friday would help millions of troubled homeowners who owe more on their mortgages than their homes are
Isn't that called "market forces"? You buy an asset that can depreciate just as easily as it can appreciate, and you take a risk at the time you
The real problem is that credit was offered at levels that were just completely unaffordable to those who took them out. The house prices rose on the
back of this lending. The housing bubble, crazy credit lending and the eventual bust was just waiting to happen.
IMHO bailing out the housing market in any way (low interest rates or helping the banks) should not be allowed. The banks should be made to foot any
loses, go bust if that what happens, but the home owner should not become a slave to the system because they were mis-led by the bank or mortgage
provider (whether knowingly or not).
The fact these mortgages were then wrapped up in financial instruments and then sold on, enabling them to become a ticking time bomb for some other
part of the economy was just bad luck.
That homeowners owe more than the house is worth is not an excuse to bail them out. Why not bail them out because they like Ford cars? Crap reason.
Negative equity is only a problem if you want to sell. If you choose to sell knowing you'll make a loss, that is your lookout, and don't cry when
Home owners are not completely free of any blame. If your annual income is £25,000/year and you buy a house worth £250,000 (10x salary) when house
prices are rising rapidly (it was what, 15% per year at its peak, if not more?) - expect to get burned.
And just like the bank bailouts, this rescue plan poses risks. If it doesn't slow the wave of foreclosures or if home prices nosedive, the
tentative recovery in the housing market could fizzle.
That is what it needs. People are selling flats for £200,000 that they bought 15 years ago for £30,000. Salaries in that time have only risen 45%
(average. 3% per year, if that) compared to housing prices that have risen 666% in the same period. It is absolutely crazy.
Only when house prices return to some level that is relative to the salaries people earn will things be as they should.
[edit on 27-3-2010 by mirageofdeceit]