Not all borrowers that bought at the height of the bubble are still in negative equity

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Sarenco

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Following on from a discussion on another thread, I thought I'd run some numbers to get a sense as to whether a borrower that bought at the absolute height of the property bubble in Dublin would be likely to still be in negative equity at this stage (obviously assuming they didn't reschedule their mortgage in the meantime).

According to the CSO, Dublin residential property prices are 33% lower than the February 2007 peak – so let's assume that a house or apartment bought for €300k in February 2007 would now (November 2016) sell for €200k.

By my calculations, a 90% LTV (€270k), 25-year mortgage @4.5% taken out in February 2007 would now have an outstanding balance of €197,699 – so that borrower would no longer be in NE.

Obviously all property markets are highly localised and I'm not for a second suggesting that all (or even a majority) of borrowers that bought at the peak of the property bubble have now emerged from NE.
 
Can I ask based on those numbers, when would the 'average' customer be in a position to refinance their mortgage assuming a need to get to <80% LTV
 
Anyone on a low tracker should be there by now,Lots of people traded up have started a new mortgage well into there mid forties pay back mortgage over 20 years.One of the problems is some people are comparing how much they gave around 2007 and say i an negative equity comparing how much They bought it for
to what it is worth now.
 
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Hi GNF

I'm not sure how you define an "average" customer but the borrower in my above example would hit <80% LTV by August 2020 if you assume (a) zero house price inflation/deflation; and (b) that the borrower continues to make the repayments as per the original schedule.

Obviously if we continue to see high house price inflation and/or the borrower starts to accelerate repayments, then he will get to <80% LTV much more quickly then that.
 
Hi Sarenco, yes you're absolutely right, negative equity has phased out for a lot of people who bought at the top of the boom, especially if they got a tracker mortgage.

I drew down a 100% mortgage for my house in December 2006 for 250k. I'm currently about 30k in negative equity (165k value versus 195k mortgage) If I had put down a 10% deposit I'd be emerging from negative equity about now.

The flipside is that I got a tracker mortgage (ECB + 1%) after an initial fixed period and due to a large decrease in monthly repayments I've saved enough cash to clear the negative equity pretty easy if or when I ever decide to move.
 
People confuse negative equity with capital losses.

I have positive equity but I lost 100,000.
 
Protocol said:
I have positive equity but I lost 100,000.
Click to expand...

Do you mean if you sold today the achievable sales price would be €100k less than what you originally paid for your property?

That's not really a problem if you sell and then buy somewhere else as presumably that other property would also have fallen in value to a similar extent.
 
People who agreed to buy there house over let say 25 years Will still own there house in 25 years provided they kept up the repayment as agreed.When I built my house in the late eighties I got one and a half times highest salary and once lower salary
We knew if we were to sell it straight away we would not recover cost to build.It was our home and we were happy to pay for it. Interest was around 16% at the time,
 
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Interesting thread, Sarenco. I suspect that the more valuable the property, the less likely the individual is to have emerged from negative equity.

Apartments do seem more problematic also. Two of my friends bought for €500k and €580k respectively. They're now worth circa €280k and €320k at this stage.
 
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