Generosity needed to resolve loans crisis

Despite the great destruction of wealth, the squandering of lifelong achievement, the collapse of businesses built on courage, sweat, and endless hours, despite near record unemployment figures, there can hardly be a more distressing manifestation of our economic collapse than the prospect of mortgage holders, unable to meet their obligations, losing their hard-won homes.

The prospect of a family that did no more than was this society’s norm and made the commitment necessary to borrow money to buy a home losing that home because they can no longer make repayments cuts to the very bone. It seems like a fundamental breach of part of the social contract we all rely on to make our way through this world. That they are losing a house they imagined their home at the behest of banks that, among many other institutions, fuelled the property madness that led to our economic collapse rubs salt into an already tender wound.

Of course, this applies to the majority of the 97,800 private residential mortgages in arrears of 90 days or more by the end of June because it must be assumed that the great majority of people are sincere in their efforts to make the repayments to keep a roof over their heads. This default rate represents some 12.7% of home loans, compared with 12.3% in the previous quarter, or 95,554 loans. Longer-term arrears — mortgages behind by more than 180 days — rose by 3.8% while, quarter-on-quarter, the number of accounts in arrears for more than 720 days was up by 11.3%. Showing that even the darkest cloud can have a silver lining, early arrears showed a decline, falling by 3.3% to 45,018 loan accounts.

Those who are in a position to pay but will not are trying to exploit this very difficult situation and are displaying a cynicism, a selfishness, that will only exacerbate the situation for those in genuine difficulties. Many of these people may have dipped a toe in the buy-to-let excitements of the last decade and find themselves in an untenable position. These cases will be easier to resolve that those involving the family home.

It is in everyone’s interests that this situation be resolved as quickly as is possible. Those in genuine need, and there needs to be a pretty rigorous definition of what that means, must be supported by Government if the idea of society is to have any worthwhile currency.

Lenders are to be encouraged — and that is putting it politely — to be as flexible and as tolerant as possible. Neither should Government be reluctant to intervene vigorously on behalf of individuals or families being treated less than fairly by any institution.

The IMF and the ECB, as well as many EU voices, have expressed amazement that it is taking so long to confront the inevitable and put measures in place that will allow banks to regain some stability and hopefully contribute better to what may be a nascent recovery.

Throughout this debate, the prospect of mortgage holders being supported by those who did not assume crippling debt has been used to throw cold water on a range of bailout proposals.

It is time to move beyond that narrow view and recognise that those in genuine need should get our support because, after all, fate and luck are all that stands between many of us and the frightening situation enveloping those who cannot pay their mortgage.