Editorial | Crisis 2: this time, it’s homemade

For many families, having to repay the principal on their mortgages will be a calamity of their own making. But it is in all of our interests that they get help

January 24th, 2013 11:13 am| by admin
facebooktwittergoogle_pluspinterestmail

Just when you thought it was safe to venture back into the economy, we’re now being told that the worst may in fact be yet to come. But this time, it’s not the banks that we’re going to have to blame. 

Unlike with the economic downturn that started in 2007, and which now goes under the name ‘financial crisis’, the fault for the approaching economic storm can be placed squarely at the doormats of the tens of thousands of people who accepted interest-only mortgages as a shortcut to homeownership. 

As any mortgage-holder in Denmark knows, before signing a loan they are presented with a list detailing the exact projected cost of their quarterly payments. For someone taking out a 30-year, fixed-rate mortgage and taking advantage of a ten-year interest free period right off the bat, this list probably shows something in the order of a six-fold increase from payment 40 to 41. 

We can understand if homeowners hell-bent on finding a place to call their own chose to ignore year 11 and beyond. It’s also understandable if they feel duped by a loan officer who sold them on the belief that housing prices would continue to rise. But neither absolves them from the responsibility they assumed when they signed on the dotted line.

But while common sense may dictate that people be held responsible for their own financial decisions, in this case, there are two good reasons why they shouldn’t be – at least not in the short-term.

The first is precedent. In this day of government lifelines (Danish banks were issued four of them), homeowners can rightly demand that they be extended a similar hand if they find themselves struggling to make their mortgage payments. 

The second is economic stability. Critics will reject a homeowner bailout as simple social welfare for members of the middle class who failed to live within their means. This may be true, but successive governments extended corporate social welfare to banks with the argument that if they failed, they would bring the economy down with them. Should we believe the economists, the pending wave of mass defaults risks pushing any hope of economic recovery even further over the horizon.

Help from the state shouldn’t be a hand-out. Banks like to repeat that not only did they pay back the money lent to them to help keep them afloat, but the government has actually profited from it. Struggling homeowners should follow their example once they too reach sturdier financial ground. In order to get there, though, they’ll need a lifeboat, even if it is their own responsibility for getting in over their heads.

Cirkus Panik (photo: Official facebook page)
Mid-February Kids: Don’t panic, here’s the circus!
Cirkus Panik Feb 13-21, 11:00 or 14:00; Skulhøj Allé 21, Vanløse; 70kr,...
photo: Sarah Coghill, White Light Gallery
Mid-February Performance: Modern Shakespeare hits the stage
Shakespeare Unplugged starts Feb 17, ends Mar 20, Mon-Fri at 20:00, Sat at...
Not often you see a double self-portrait
Her art endured despite patriarchal prejudice and the Skagen scandal
Marie Martha Mathilde Triepcke wanted a life full of passion and art. She g...
Some 2,000 candles, symbolising love, warmth and life force, will be used to mark the procession (photo: iStock)
Quiet march with candles to mark anniversary of Copenhagen terrorist attacks
A quiet march with candles will mark the sad anniversary of the Copenhagen...
Rather than delivering newspapers or selling buns, Danish youth prefer running their own companies (photo: iStock)
More young Danes starting their own business
A growing number of young Danes prefer to start their own business over get...
The famous Cirkusbygningen in central Copenhagen (photo: Knak @ fotokongen.dk)
Bus crashes into Cirkusbygningen in central Copenhagen
A bus has this afternoon crashed directly into Cirkusbygning  in central C...