Caroline Madden wrote an article in today’s Irish Times ‘Just who is getting the mortgages?‘. It is a question that begs answers, at first it seemed to me like asking ‘Who is John Galt?’ (Rand readers will understand). The stories we hear constantly is that banks are hoarding credit, they will not extend credit to particular groups and when they do the underwriting is so strict that even credit-worthy applications are being turned down.

This article features our feelings on the matter, we believe that some of the banking statistics being thrown around make fore ‘good copy’ (good PR) and very little else, as we are not seeing applications turn from approvals in principle into closed loans, and in many cases, approvals are coming in far below what the applicant is actually looking for.

One element of this is natural, after a credit fuelled boom you often have a collapsing demand, credit after all, is like reaching into the future to realise income from that point and transporting it into the hear and now to spend, so when many people use credit and it goes toward a speculative bubble, a normal result is a fear of credit and an avoidance of borrowing as well as a reduction in the appetite in general for credit.

What is not normal however, is the refusal of banks to play their part in the intermediation process, whereby they take money from savers and give it to others in the form of loans, and that is symptomatic of the credit crisis, banks would rather sit on liabilities than make any effort toward the creation of new assets.