Payment Holidays
Alistair Darling’s plan to give struggling mortgage holders in the UK ‘payment holidays’ has been dismissed by lenders. With lender profits falling dramatically the amount of money available for lending has fallen meaning that if borrowers ventured into the property market they would be likely not to get good deal on their mortgage or not get a mortgage at all. The finance sector has now come out and said that plans to give borrowers ‘payment holidays’ would mean a further constriction on available finance.
While it is no surprise that certain mortgage products are not available and we are not getting as good a deal as we did in 2007, the main problem with the current crisis was that the finance industry was relucant to lend at prohibitive rates and for the problems to be alleviated we dont need lenders to lose more money
Once the finance sector has sorted out its problems and is properly regulated it can start to lend more money at better rates. If the money is not in the system they we cannot borrow it, we cannot expect lenders (as money making concerns) to lend at unprofitable rates.
Payment holidays would put further pressure on the system, while they do sound a good soundbyte for the media they will not assist in the long term. People who were more sensible in getting a suitable mortgage will again be supporting those who overborrowed.
While there is hysteria about people losing their homes payment holidays are not a long term solution (unless you can get a gap for 2 or 3 years) but then we will end up payment more in some other way.