Reply To: PIGS

#83536
Anonymous
Participant

“Banks are businesses. They are there to accept deposits and relend at a margin (or profit). They view each application on it’s merits especially with regard to risk. Not the risk to the borrower, but the risk to the bank and it’s investors and shareholders. “

Hi Rob and Paul,

sorry, I was brief in my previous statement.

When I said risky bank investment I was thinking at the following scenario (I am not claiming by any means that it is Holly’s situation):

– somebody takes a say £100K secured loand against the property in UK.

– that £100K is used for a payment in Spain (I do not believe that many properties in
marbella costed less that £100K in 2005 so I consider that the costy of the property in Spain is more than £100K).

– the price for the Spanish property goes down and the person is not interested anymore in purchasing it.

– he/she either loses the £100K deposit or is forced to buy and they tries to sell for a loss of more than £100K.

– the person remains with a £100K debt which cannot be covered from salary and
the person needs to sell the UK property and downgrade.

– the prices in UK have also fallen and the cost the UK property is now lower than the mortgage.

– the person forecloses in UK.

– the bank has losses due to the UK property foreclosure.

Everything started from that secured loan for the Spanish house purchase.

Of course this is a worse case scenario, but it might happen…