This is our truth, tell us yours
George Osborne tweeted this week about the new mortgage rules. He said “Changes to the mortgage market will help stop irresponsible lending. Part of plan to build resilient economy & avoid mistakes of past”
Part of the lie of austerity is built on the idea that the financial crisis of 2008 was caused by irresponsible lending and financial incontinence on the part of consumers, not bankers.
The reality of course is that what brought down Northern Rock and other banks was a funding crisis; the drying up of the secondary market in re-packaged mortgages and the divergence between LIBOR and Bank of England base rate meant Northern Rock could not re-finance itself at an affordable price. (See Martin Upton’s analysis here.) Other banks reliant on wholesale market funding went the same way. How do we know, seven years on from Upton’s analysis, that this wasn’t a crisis caused by irresponsible borrowing and irresponsible lenders?
Take a look at the data on this page. At the peak of the 1990s mortgage crisis repossessions were running at 0.77% of mortgages – they peaked in 2009 at 0.43%.
Well, maybe lenders changed their repossession policies after the disaster that was the 1990s, you muse. Mortgages more than 12 months in arrears peaked in 1992/3 at 1.5% of all mortgages – since 2008 the comparable figure has never exceeded 0.43%.
So where, actually, is the evidence for irresponsible lending? Or is the government engaged in changes to mortgage rules as part of the biggest cover up in history, the blaming of consumers for a financial crisis, in 2008, that was caused by a crisis of banking practice? Draw your own conclusions.