This is exactly the problem - people are incredibly naive about financial products and long term risk.
Most people just see the monthly payment at the interest rate they sign up to and hope they can make those payments and, especially at the top of the market, were just desperate to get onto the property ladder and accommodate themselves.
A lot of people are also vastly over-optimistic about their economic prospects. That's good in so far as it means people are generally ambitious, but it is not necessarily reflective of reality or prudent.
Human psychology does not do prudent decision-making very well. That is why strict financial regulation is in place to prevent markets from going crazy. Stock markets go nuts based on whims, housing markets, you name it.. once something becomes accepted practice, people all jump on the band wagon.
Also, never under-estimate the heard instinct in humans. We do make decisions by ourselves sometimes, but for a lot of issues in life, we group-think. That is what our brains are evolved to do because in a lot of situations it works well.
If a lot of people think something's correct, we tend to just accept the group's view. For a lot of things this works well, but for some things it's massively dangerous e.g. it can result in market bubbles, election of extremist organisations e.g. the Nazi party's electoral success in Germany before WWII being the most terrifying example, or the formation of cult-like views.
It is very hard to shift people's opinions when lots of people are telling them that something's correct.
In Ireland, the accepted reality was that you HAD to get on the property ladder and that prices could only increase. That's how all bubbles operate and that is exactly why you need serious and prudent regulation to prevent them and why banks are supposed to be doing their job by managing people's ability to access crazy levels of financing.
Throwing money at consumers without any notion of how they are going to ever pay it back is totally unreasonable and financial suicide and I do think the banks (and ultimately by the looks of it the entire system) will just have to accept that that is what happened. Thus, these write-downs are going to have to happen.
Originally Posted by riclad
THIS is a nurse,she should be smart enough to know, i borrowed x amount,i have to pay x amount per month,can i afford it .I hear nurse,s wages are pretty good.
IF she work that out,i would,nt trust her to hand out medication.You need a good education and leaving cert to become a nurse.
I dont think the banks can afford to do this with everyone whos having trouble paying a mortgage.
I didn,t know 3 bed houses are going for 70k, so who would buy a 1bed apartment ,if i can buy a house for 70k?
IF a nurse cant pay a mortgage god help the people on lower wages who dont have strong unions to protect them.
She's a *nurse* - she makes medical decisions, looks after patients, knows about diseases, illnesses, is probably a very caring, nice person, very people-focused, and has all sorts of great positive things to contribute etc etc.
However, she is not a trained actuary, banker, economist or financial expert.
I would not go to a bank with a broken leg, or to get an injection! Nor, would I expect a nurse to be a financial expert.