It's been well publicised lately that the housing market is on the brink of a crisis - in fact, the crisis has hit the US already. As mortgages become harder to come by and homeowners begin to struggle with rising interest rates and lower demand from buyers, the market is faced with a vicious circle in which prices keep falling, but there are not enough mortgages being offered to increase demand.
What happened? - a timeline
The problems can be traced back to the housing market in the US, in which people with poor credit history (known as 'sub-prime' borrowers) were allowed to take out mortgages - many of whom subsequently could not keep up with payments.
Many of these mortgage debts had been 'bought' by UK banks, meaning they were now responsible for receiving the repayments. However, due to the amount of times these debts had been bought and resold, it was often difficult for banks to predict how much of the debts would be repaid.
When many of these sub-prime borrowers began to fall behind on repayments, it hit whoever 'owned' the mortgage debts - meaning both the US and the UK were affected. This is what became known as the 'sub-prime mortgage crisis'.
What is happening now?
UK banks' losses have in fact been small so far - but there is a risk that they could get a lot bigger. For this reason, they are very cautious about new lending, and so they are tightening the criteria needed to qualify for mortgages.
The knock-on effect of this is that houses are harder to sell, meaning prices are getting lower. However, lower mortgage availability means that demand isn't getting any higher - so house prices are likely to fall further - and so the cycle continues.
The Bank of England has acted on two fronts. Most significantly, they have swapped £50bn of secure Government Bonds in return for banks' mortgage debts - effectively a show of confidence that sub-prime losses will not be as big as the banks feared. This move is designed to calm the insecurity that is causing the tighter lending policies and prevent any particularly dangerous drops in house prices.
Additionally, they have lowered the basic interest rate in order to convince banks to lower mortgage interest rates - but this is currently not working, and so the problems continue.
What happens next?
There are mixed opinions amongst the experts:
RICS (Royal Institute of Chartered Surveyors)
·Predict that house prices at the end of 2008 will be down by 5
CML (Council of Mortgage Lenders)
·House prices at the end of 2008 will be down by 7 to 770,000 sales
Although the extent of the predictions vary, nearly all experts agree that the housing market is increasingly on the downturn. House prices have only fallen slightly so far - but if the trend continues, the housing market will decrease in value significantly in the coming months.
The US have already been through what the UK is going through now - a tightening in lending criteria combined with fewer mortgages - and they have seen some sharp falls in house prices. Many economists believe the UK will follow this pattern.
Banks need to continue borrowing and lending, if a little more carefully than before, if the market is to recover. If they don't, house prices will continue to fall, and it could be years before they begin to rise again.
Past Present Or Future
Asbestos was a building material widely used in the UK from the 1930s up until the 1970s and was valued for its strength and resistance to fire and chemicals. However, what was not known at the time was that tiny asbestos fibres were working their way into the lungs of unknowing workers whenever a block of asbestos was broken up.
Years later, these workers start to develop cancers and scarring in their lungs that has developed as a direct result of these fibres. Asbestos-related diseases such as mesothelioma and asbestosis have a long latency period and it can take between 15 and 60 years for symptoms to become apparent.
These conditions cannot be cured and statistics from Cancer Research UK show that just 10% of people diagnosed with mesothelioma will survive beyond 3 years. Asbestos-related diseases are a type of industrial illness which clearly requires substantial compensation to be paid to the injured person or their family, if the person has died.
The key question is that of who should pay the compensation and how much. If a person suffering from mesothelioma or asbestosis has worked for more than one firm that exposed him to the dangers of asbestos, are the companies jointly liable to pay compensation or can just one company be found to be negligent?
A ruling in the case of Fairchild (2002) created the precedent that if one business could be found to have been negligent, that business would have to pay the full compensation award. This was greeted with relief from claimants, who find it difficult or even impossible to track down all the employers who may have exposed them to the risk of asbestos after 30 years.
However, this ruling was amended by the House of Lords in the recent case of Barker v St Gobain Pipelines (2006). It was decided that all the companies who had exposed the claimant to asbestos should share the compensation burden. The insurance company of each business would pay compensation in proportion to the risk they caused.
This could present the scenario of mesothelioma and asbestosis sufferers only receiving part of the compensation to which they are entitled if they are unable to identify all of the businesses that may have caused their industrial illness.
The Pneumoconiosis (Workers' Compensation) Act of 1979 offers people the chance to make a compensation claim if they cannot track down any of their employers during their time of exposure to asbestos. However, if any mesothelioma or asbestosis compensation at all has been awarded to the claimant by the Courts, this fund is made unavailable, meaning that this Act will not be of any assistance to the people who have received partial compensation.
A solution must be reached for the thousands of people who are diagnosed with mesothelioma, asbestosis, and other asbestos-related industrial illnesses each year. The legacy of asbestos is still here for years to come. A Health and Safety Executive report in 2003 suggested that diagnoses of these diseases will hit peak figures between 2011 and 2015, when at least 2,500 people a year will be dying from asbestos-related disease.
Just what the answer is has not yet been determined. One idea that has been put forward is that of having the equivalent of the Motor Insurers Bureau, which would represent untraceable companies. Insurers would each put into a pool to which claimants could turn after all other options are exhausted.
Another option is that the ruling in the Barker case is overturned and the previous method of one company taking full responsibility for compensation is reinstated. However, insurance companies are likely to offer many objections to this suggestion.
The most important thing is that the people suffering from mesothelioma, asbestosis and other incurable industrial illnesses get compensation for their injuries. It is recommended that anyone considering making a compensation claim of this type gets specialist representation from personal injury solicitors with particular experience and expertise in this field.
Both Melanie Taylor & are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
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