
Lenders make house price crash worse

Mortgage lenders tend to sell repossessions through a limited number of estate agents, who may not even be local, and properties often end up being placed into auctions for a quick sale. Peter Bolton King, the chief executive of the National Association of Estate Agents, said: “It is frustrating for an estate agent to have a property that they were selling be taken away and given to another agent who is working for a lender and may not even be in the area."
Banks and mortgage lenders have always insisted that they are required to get the best price possible when selling a repossed property, but many suspect that this is not always the case. Certainly, there have been anecdotal reports of properties being sold at any price by lenders who continue to place re-building their balance sheets ahead of the needs of their customers. Angela Knight, of the British Bankers' Association, said: "Banks are working hard to ensure that as many of their customers as possible are protected against the downturn."
In the current economic climate, it has been suggested that the most effective way of protecting a customer is not to reposses at all. Tim Lee, Managing Director of the Mortgage Warehouse (GB) Ltd says:
“It simply doesn’t make economic sense for lenders to repossess properties in a falling market.
“The costs of following through a repossession are thought to average in excess of £30,000, and in that respect, it would be cheaper to simply freeze a borrowers payments for a while, especially if there is any realistic chance of their situation improving.
“Whilst there will always be instances where the situation cannot be retrieved, and repossession is the most sensible option, the cost of freezing interest for two years on a £200,000 mortgage is still considerably less than the cost of repossession.”
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