Sky News business editor Michael Wilson

We've all told a few fibs now and again, no doubt. A white lie or two. No harm done.

When my friends and I were newly married and starting a life in London, we were regularly economical with the truth when it came to getting that all important first mortgage to transform a slum into a first home.

The rule of thumb was that you could borrow three times your salary, and not more than 75% of the property's price.

Property in London being as expensive as it was even then, the only way to get on the ladder was to lie about what you were earning.

It wasn't seen as criminal - rather a rite of passage, and after all you were only screwing the banks, and if you didn't do it, you didn't get a mortgage.

If you did the place up quickly enough, you'd ride the rise in its value and move on to the next one, probably lying again about how much you earned.

It was, above all, your call and your responsibility. Contrast that with the recent ridiculously easy terms that got us into the present pickle where any money was freely available, and payback time was never mentioned. Well, it turns out it was worse.

The price comparison outfit uSwitch has found that more than two thirds of money lent in unsecured loans,(ie non-mortgage), was granted without the recipients having to prove their income. A sizeable proportion of those (15%) applicants were not even asked how much they earned on the application form.

The banking industry says that most of those were customers who were applying to their existing bank, who would know all about them.

uSwitch counter that by saying that their research shows that 45% of the loan applicants were in fact applying to new lenders.

I'm sure the argument will continue, but it strikes me that the one truth in it all is that those who were borrowing from the lax system knew exactly what they were doing.

And they didn't even need to lie. And that points to something which is a bit unmentionable in this credit crisis - but it goes along the lines of: you're in debt. You knew what you were doing. Your fault.

Comments

[Prefer not to say 17 Apr 2008 13:32:31]

Yesterday a subsidiary of Credit Suisse has made me and my family homeless. With more than enough equity in the house and the reasons for getting behind being beyond my control due to the company I worked for going into liquidation. They never offered any support or assistance the bottom line has always been once 2mths in arrears they would seek for repossession. Having eventually secured employment I offered part payments with a view to full payments and more within 6mths max. They couldn't give a toss. So much for the CML code of conduct another piece of worthless paper.

I have had over 10 years corporate banking history with a very well known high street name. Today in my hearing I have never been so disgusted with the immoral way they have behaved. I proposed a sound commercial and moral route to get back on track. I say if they want money off the state then by law they have to stop the repossessions and start to work with their debt rather than taking the fast route in trying to crystallising their book.

We are dealing in terms that go from 25 to 30 years and yet 2mths of difficulties put’s you in the queue towards being homeless. Mortgages should have the variables of months not the payments, they should be fixed this way people can budget safely in the knowledge that if rates drop so does the term and if rates go up then so does the term and 9-12mths max before proceedings can take place. A mortgage should be like a marriage it’s a two way agreement and both parties should work at it for the benefit of each other and not just throw in the towel at the first hurdle.
They need the states of all major economies to help them dig themselves out of a hole they were very happy to dig in the boom days. Well I’m happy to help them but only once the laws are changed preventing them from pulling plug’s on good, equitable homes. On the 9th of April Brown was quoted in the independent “Brown calls on mortgage lenders not to repossess”. On the 13th April “Chancellor Alistair Darling has urged mortgage lenders to pass recent interest rate cuts on to homeowners.”
So In future Mr Brown and Mr Darling I strongly urge you not to give them one more penny until in law and we’ve seen how quick it can be done when NR was and still is in a mess. That these glorified loan sharks are bound to halt repossessions as its serves no benefit to the economy or the family’s. It only benefits the shareholders and their needs are far outweighed by a far greater need to wipe the slate clean on how mortgages are written and re-build them with legal obligations that are tied to moral codes of conduct and as I’ve already stated with the variable being the term and not the payment. If little over 2 years ago I could lend over a £1m to a business for up to 7 years in this fashion then £200k over 25yrs is plausible as I sure millions of peoples life’s would become less worrying overnight.

[PJ McGoldrick Isle of Man 10 Apr 2008 14:41:39]

For years we have remained quiet while the Financial Sector paid their Management and Staff obscene bonuses.
They were tasked with managing their businesses on behalf of shareholders, however they obviously failed to perform normal risk assessment and by putting their personal interests first have destroyed shareholder value.
We now have a situation where government, investors, mortgage holders, and business, are expected to pick up the pieces and carry the can, while those responsible count their ill gotten gains and watch from the sidelines.
Lets us hope that Shareholders and Boards have learned a lesson and in future financial management will be encouraged to manage in a prudent way and not be rewarded for taking excessive risk with other peoples money for personal gain.

[Elizabeth Davies Cape Town 8 Apr 2008 09:28:26]

Michael Wilson
That's right, if you want all the goodies in life but can't afford them only on tick, then suffer now you must!
It is time to get a grip on a bad situation, batten the hatches, the perfect storm has hit.

[kelly 8 Apr 2008 09:22:45]

i am sick of the well off people in this country tell the rest of us that if we cant afford it we shouldnt have it. have any of these people tried living on the minimum wage suppossedly the average wage is £30,000 per annum well if i an others like me where on that wage we wouldnt get in debt or need to claim tax credits which is bleeding the state dry by non workers while the people who do work that are entitled to claim it get into debt because they get off there backsides and work trying to get this fantastic wage of £30,000 per year which my husband and i never come close to then end up having to pay taxcredits back because inland revenue claw money back through overpayment but they never take into account your basic need of paying mortgage or other bills and feeding your family. by the way i dont live an excessive lifestyle i live in a terraced house i have two children i both me and my husband walk to work we never go out as a couple or a family and never have a holiday we have to save for xmas and birthdays all year round because we dont like getting credit so how dare those on fantastic wages tell me my children shouldnt have what they want or need when i work towards it just not lucky enough to be in job that pays as well as theres does. thats the reality of living in this country today working to survive to pay overpriced utilities and mortgages to line the fatcats pockets so lets see things change and see them practice what they preech.

[michael Wilson 6 Apr 2008 19:08:20]

no...in elizabeth's words we must all suffer. it's tough but no-one ever complains about the good times..only when the bad times bite..and speaking bad times, would not a constructive beginning to the bad times in zimbabwe be a blessing to africa? i'll be addressing that issue in the coming days having spoken to a few people involved...but there's a tragedy needy some business confidence

michael

[Ali, Turkey 5 Apr 2008 21:48:59]

Having previously worked for a large UK bank for 15 years, I have seen many cases of overindebtedness, some very seriously out of control. OK, so banks offer loans, sometimes quite freely... but, isn't that what they are here for??? I can't really imagine the Great British public and/or our media congratulating a bank for saying 'NO' to a young 20 something who should really 'save up' for his/her fancy new car, rather than taking out a loan they cannot really afford. I suppose the cigarette companies are guilty of mass-murder too, or holiday companies guilty for an increase in skin cancer cases. Come on..... when will people take responsability for their own actions. If you borrow more than you can afford, whether by lying or not, it's tough, you have to live with the consequences. After all, who benefitted from that lovely house, the new car etc, not the banks fault really is it? I wonder how many folk calculate their disposable income before even taking on or considering a new credit committment? It's a novel approach in this day and age, I know, but greed and impatience to have eberything 'now' is crippling this country!!

[Andrew. Greece 5 Apr 2008 19:27:22]

I always feel those in Ivory Towers who then in a rather self satified way pontificate to the less fortunate whilst either not knowing or forgetting what it's like to be hard up, should shut up! Also what about the small business men who used to keep the UK poplulous in employment who have borrowed to expand to create more jobs thus create more taxes for the Darling of the eyebrows, then fall on hard times for doing nothing other than work 24/7 and being on the wrong side of market forces. No, we are indeed on the edge of a meltdown, and I for one blame the greedy greedy banks and their fat shareholders.

[george aberdeen 4 Apr 2008 17:00:13]

Well I do understand what you are saying about you know you were getting into debt so its your fault, but you know not everyone in this country are on substancial wages and when you see an advert that looks good and it seems like there is nowhere else to turn you will bite the cherry that is offered, so an awfull lot of the blame has to be put on these banks and credit card companies trying to meet targets, just so they can get their fat cat wages. As an insolvent I wish somebody had told me about insolvency years ago instead of fighting what was a losing battle which was what I did. Thank goodness for the citizens advice beauro.

[Elizabeth Davies Cape Town 4 Apr 2008 12:57:02]

It's the old saying coming home to roost..."never look a gift horse in the mouth".
Suffer now you must!

[Khalid 4 Apr 2008 12:42:10]

Sir
Naturally life provides many a moment of reflection, however, so as not to add to the debt pile, as you state there are two parties to the transaction whilst prior to executing the terms of contract has satisfied himself so as to advance the delivery of life's luxuries.
Now, added to that, a sudden wind of change diverts the desired focus, leaving many a party without what they started out to obtain, thereby a repeat process being advantageus to one and not the other.
Whilst perceptions remain on a case by case basis, naturally one will say [Doo Wop-Lauren Hill]!