'No market value' when property is repossessed
03 September 2008
Banks do not succeed in attaining market value for properties that they repossess from their customers who have defaulted on mortgage payments, it has been claimed.
Michelle Slade, from financial information provider Moneyfacts, noted that banks may offer a number of lifelines to consumers that are stuggling to make payments on their mortgage, such as reducing the monthly outgoing and spreading payments over a longer period of time.
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"If a property has to be repossessed it is likely the lender will get less than market value; as a result they may not get back all of the advance. They also prefer to retain the income stream from the mortgage," said Ms Slade.
She added that there is a certain amount of stigma attached to having large amounts of bad debt on bank books and that as a result banks are currently very wary of lending to one another as they do not know what debts different organisations may or may not have.
In August 2007 there were 11 lenders offering 100 per cent mortgages. This number fell to zero by August this year.
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