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Do you want a mortgage from a man who says your new house will be cheaper tomorrow?
The head of Barclays bank is reported today as saying that he thinks we are only half way through the slump with house prices likely to fall a total of 30% and in an interesting move, he criticised mortgage borrowing levels over the last decade.
A curious suggestion coming from a mortgage provider. A little like the drinks industry blaming drunks rather than those who sell their product at ridiculously cheap prices. The 125% mortgage is after all, the housing market equiverlant of BOGOF, 'buy-one-get-one-free!
To blame your customers or a market that Barclays were happy to participate in for the current woes of the housing market is a bit rich. As for the prediction that house prices will be lower tomorrow than they are today is a little like turkeys voting for Christmas.
Who wants to borrow money from an institution that seems to be suggesting you are stupid?
This is going to hurt!
Like other little white lies, there are occasions when I don't want complete honesty. It doesn't pay to be completely truthful every time you hear the question 'does my bum look big in this?' Equally, you'd prefer the dentist to say 'this won't hurt' since too frank an answer is somehow off-putting.
Earlier in the summer, the heads of HBoS and the Nationwide had similar Damascean moments and decided, rather than to keep quiet, to give an honest view of where they thought the market was going.
Rather than keep schtum, both decided to open their mouths and acknowledge what most of us knew to be true and didn't want a banker to confirm. But the cost of such honesty was that buyers jumped back like scalded cats and demand for property dried to a trickle. Values for everyone fell as a result.
We all know what is happening to house prices but one reason it took the Governor of the Bank of England so long to admit the 'R' word is that confidence is essential, particularly in a recession.
When will the market pick up?
Perhaps this is the banks' way of shifting blame from them while they take the billions of tax payer hand outs or the Sovereign Wealth fund money and re-build their shattered balance sheets. Either way, if you want to know when the housing market will pick up, the answer is not until the banks learn to keep their mouths shut!
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