So the credit crunch is coming… or is it??

The fiasco at Northern Rock has irrevocably damaged the reputation the financial services industry and thus lost the trust of millions of borrowers.

The Northern Rock business model gambled with its customers futures. Offering a staggering array of schemes to entice even the most unable borrowers. In some cases even up to 110% of purchase value. How many Northern Rock customers knew that their lender in fact was borrowing money from elsewhere?

Better people than I have already lambasted criticism upon Northern Rock so let me leave it there. However, the issue of “responsible lending” must be discussed. The key principle of lending is to get your money back with interest, not to speculate on the capital growth to cover your backside.

If someone has not been able to get a mortgage historically, there will be a reason for that. Equally a consumer who has not been able get a mortgage but now can (for no obvious reason) should smell a rat. However the responsibility lies firmly with the institution that has “tweaked” its modelling to tap into an over–needy consumer marketplace.

Let Northern Rock be a warning to all who have ever considered sacrificing security for a bit more market share.