The banks employ the valuers and when the bank is awash with money and the bank manager is being pressured to lend it, if the valuer doesn’t come up to the value the borrower and manager want, the valuer knows he won ‘t get any more instructions. Those are the fear factors. The greed factor is of the borrower who signed the mortgage document after being told by the agent that the stats showed easy % increases over the last few months and years. They saw a straight line graph going upwards and piled in. Everyone is to blame, but at the end of the day only one person actually took action by signing the deed.
And now we have a pile of funds building up again. But the banks are being much more cautious, thus holding so many in negative equity. Now is the time when the banks should be lending 110% as its highly unlikely prices are going to collapse again. As prices rise, the % of loan to value should be reduced so that as the market reaches higher levels the bank’s mortgage and the borrowers loan is well covered if there is a bursting bubble. Last time it was the opposite and that’s what caused the problem.
BC Man talks of PONZI schemes. The biggest one is the UK National Insurance scheme, but that’s another subject!
The original article is here.