An article in the Independent yesterday pointed toward 100% mortgages being a significant attributer to the bubble, I would wager it was a symptom rather than a cause, the IBA meanwhile has called for all mortgages to be made on a non-recourse basis.
The good thing is that people and organisations are trying to find a way to avoid a repeat of the property bubble, and they are not one off events as the UK can testify. There are however, significant factors contributing to what happened.
1: lenders didn’t price risk, they didn’t even ‘price at all’: Banks have utterly failed to do the job they were designed to do, namely that of profitable intermediation, we had huge amounts of competition on lending, that drove down criteria requirements and also compressed margins, then along came trackers, these had low margin price promises – Bank of Scotland brought them into Ireland and have since left. I spoke with a Bank exec. yesterday and he …