The strange transformation of Bradford and Bingley

Bradfordandbingley

Amongst all the other dire news today, I heard that Bradford and Bingley had failed. This brought the crisis close to home, since I’d had an account there since I was a toddler. My parents had set it up for me when it was still a ‘Building Society’ (a customer-owned organization like a credit union). Back then, the only way you had a chance at a mortgage was if you had been banking with someone for decades, so starting an account early was essential.

By the time I was a teenager, things had changed. The loan process had started to become automated, and the loan officers were given less and less say in the decision. A decade ago, the mortgage business had become so profitable that B&B gave up its mutual structure, distributed shares to its customers and jumped into high-risk, high-profit areas like liars loans and buy-to-let mortgages.

I don’t have the expertise to enlighten anyone on what’s happening in the markets, and as Megan McArdle says, it’s amazing how all the things you were against before the crisis, caused it. What does astonish me is how far we came in three decades. When I was born, you had to have a massive deposit, glowing references, a long history with the firm and the personal approval of your local bank manager to get a mortgage from B&B. A year ago all you needed was to turn up and pass the ‘fog a mirror with your breath’ test.

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