I have read several articles in this week in our national papers and in them the authors said ‘banks are not lending’ and in one it was implied that this was somehow wrong. A point of order must be raised, firstly, it’s not wrong and secondly they actually are lending, just not freely or irresponsibly.
The frustrating thing is that even after all of the fallout, all of the crashing property prices, all of the international crisis news, that so many people still don’t get it. Cheap credit and easy lending is what go us here to begin with, we won’t fix the Irish economy with more mortgages being freely available.
Lobbyists take note: While you might strong-arm or influence the Government (I don’t know which method lobbyists use but either way they are effective) into supplying money for mortgages via recapitalisation or Homechoiceloan or any other plan, the fact is that reasonable people will not sign up to it, they will buy when they are good and ready, and when they have some confidence.
Are banks lending? In short they must be or Irish Mortgage Brokers wouldn’t exist, nor would any other mortgage broker. We are successfully helping our clients who do want to borrow in the current environment to find the best deals and these loans are drawing down. The common thread however, is that banks are reapplying traditional standards.
What does that mean? It means that getting a mortgage is not an ‘entitlement’ it is not a ‘right’ nor will it be ‘easy’, nor should it be, it is ease of credit and the large supply of it, when matched with extremely low interest rates that were kept down for too long that fuelled the Irish property boom, I now refer to it as the ‘ka-boom’ because we are now at the second stage of the explosion, only this time its a downward trajectory.
Lend freely, at high margins, and on good collateral with adequate security. That is what must be done in order for banks to survive. The laughable issue is that the state made a big song and dance about ensuring loans were provided to first time buyers! In fact, businesses need the money more, the first time buyer market is quiet at the moment for the very reason that confidence, job security, and a falling market don’t normally result in lots of transactions, the adjustment is natural, our reaction to it however, is far from that.
There is no ‘entitlement’ to credit, anybody who goes down that road is only setting us up for property-crash 2.0. The explosive mix of easy credit, historically low interest rates and a wall of liquidity with a glut in savings is the precise combination that brought us here, if anything, banks are doing the sensible thing in paring back lending at least to some degree.
As a mortgage brokerage we are obviously feeling the pain of this more than most, but it is the medecine that must be taken in order for there to be a market in the future, if we fan the flames of the toxic tiger during its death knell we won’t resurect a healthy creature, we’ll merely reincarnate the beast that brought us here to begin with.