Monday, 9 June 2008

25% increase in default...

"According to a report in the daily Aamulehti, data gathered from banks by the Financial Inspection unit show that the number of defaulters has increased in the past two years."

At the end of last year households that had not paid from one to three months of their loan instalments had increased by 25 percent over the previous year.

The number of households that had gone at least three months without servicing their loans also stood at 25 percent more than in 2006.

In spite of the statistics, the inspection unit found that the proportion of bad loans still remains at under one percent of all loans outstanding - and banks themselves are not unduly concerned about the situation.

The Financial Inspection unit suspects banks of granting excessive housing loans to clients, which then show up as higher numbers of defaults when interest rates rise

No surprise about that. But think about it, the economy is still booming well for another 3 to 9 month then the slowdown will accelerate thus pushing even higher defaulters, slowing even more the economy then exarcerbating even more the number of it? when it start, it's a cycle, it continues until a bottom is found.

The impact on the housing market? nothing good in the medium and longer term. You will have in the short term the illusion that the housng market is still holding and that prices are still stable. This is only an illusion as the process of normalisation has started, the market will autoregulate itself ...unless corrupt politicians, for self interest and under business pressure, try to delay the correction by passing some legislation or "socialize" the losses.

Regarding debt, there are as well the predator lenders where you have the possibility to get loan through SMS, "instant loan". As usual the financial watchdog, raise the issue but that's all it did...they are still operating and ripping off people...

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