This applies to tracker mortgage holders only.
For those on trackers, the tracker is worth approx 25% of the outstanding mortgage based on normal market bank margins. - If you were to buy that same house today and pay the exact same monthly payment, you would need to buy it at 25% lower price than you paid. (assuming a 95%-100% mortage).
In addition, the mortgage tax relief is worth approx 5% of the mortgage value.
So combined, the tracker and soon to be gone mortgage relief is and has been worth 30% of your mortgage value since trackers were taken off the market and as long as you keep your tracker it effectively has consumed half of the estimated 50% house price decline. For those who bought before the peak, it will consume an even higher percentage.
So point one - is, if you've a tracker, you're not too badly off as it cushions 25 points of the total house price decline since you bought it.
Point 2 is where I am seeing a potential debt write off that would have little effect for the banking sector but great result for those who need it.
For those who the house purchase is far too big a burden and they want to move into rented accomodation or start over again etc, the bank simply gives a 25% dicount on the outstanding mortgage, then the house is sold at current value and the bank arranges a medium term loan for the relatively small balance at standard mortgage rates.
EG - original house price in 2006 €380,000, current outstanding mortgage 320k, mortgage discount 80k leaving mortgage balance of 240k, house sells for 200k, leaving manageable 10 year personal loan of 40k.
Advantages for the bank is they have already taken or priced in the hit on tracker mortgages and now have a reasonable chance of full repayment of outstanding personal loan.
Advantage for the house owner - no negative credit rating or default recorded, chance to get started again and only smallish loan to service over an agreed period.
With the move of trackers into the IBRC, my guess is something along the above lines have already been discussed and I think its as fair a outcome for all as possible.
For those on trackers, the tracker is worth approx 25% of the outstanding mortgage based on normal market bank margins. - If you were to buy that same house today and pay the exact same monthly payment, you would need to buy it at 25% lower price than you paid. (assuming a 95%-100% mortage).
In addition, the mortgage tax relief is worth approx 5% of the mortgage value.
So combined, the tracker and soon to be gone mortgage relief is and has been worth 30% of your mortgage value since trackers were taken off the market and as long as you keep your tracker it effectively has consumed half of the estimated 50% house price decline. For those who bought before the peak, it will consume an even higher percentage.
So point one - is, if you've a tracker, you're not too badly off as it cushions 25 points of the total house price decline since you bought it.
Point 2 is where I am seeing a potential debt write off that would have little effect for the banking sector but great result for those who need it.
For those who the house purchase is far too big a burden and they want to move into rented accomodation or start over again etc, the bank simply gives a 25% dicount on the outstanding mortgage, then the house is sold at current value and the bank arranges a medium term loan for the relatively small balance at standard mortgage rates.
EG - original house price in 2006 €380,000, current outstanding mortgage 320k, mortgage discount 80k leaving mortgage balance of 240k, house sells for 200k, leaving manageable 10 year personal loan of 40k.
Advantages for the bank is they have already taken or priced in the hit on tracker mortgages and now have a reasonable chance of full repayment of outstanding personal loan.
Advantage for the house owner - no negative credit rating or default recorded, chance to get started again and only smallish loan to service over an agreed period.
With the move of trackers into the IBRC, my guess is something along the above lines have already been discussed and I think its as fair a outcome for all as possible.