Well, that didn't last long. The income-to-loan
ratio for borrowers in the UK is now higher than the pre-banking collapse
level. Oh dear.
A big deal?
Damn right. Part of the issue that caused the
banking collapse was irresponsible lending…..i.e. lending larger amounts than
incomes could afford. This created a vacuum of bad borrowers that simply couldn’t
afford the debt and left banks with a legacy of money that simply wouldn’t get
repaid.
In these situations, bank reserves are used to
cover the ‘gaps’ in non-repaid loans. And when banks don’t have free money to
lend, the whole system stops and the economy grinds to a halt.
The graph above from the Council of Mortgage
Lenders highlights that we are now lending at a higher ratio of income than
back in 2007 for both first time buyers and homeowners.
Which begs the question……if I can see this,
then the Government, Regulator, Bank of England, Treasury, etc. also can but
why is nothing being done?
The silence is deafening. Have we just not
learnt anything?
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