Is Negative Equity really that big a problem?

[jerry2623]

And what if people, like me, are in a situation where we didnt buy to make a quick buck, but now need to sell because of seperation and cant because the banks are not willing to look beyond their manuals/handbooks that were written up before thousands of people ended up in NE?

Maybe you just have got to except the situation you are in and realise that ye cannot afford to separate at the present moment . Maybe ye both have to be mature and hang on until you both can afford to.
I know this is harsh but life is not always a bed of roses.

 

[liger79]

Jerry, I dont think you fully understand what a situation like this is unless your stuck in it. Should i wait till the other person dies because they deliberatly tie themselves up with maxed out cards and car loans, spending every penny they get to make sure that they can't afford to clear the NE and this is the situation i'm trapped in???? Really? Are you telling me I should JUST ACCEPT IT?????

 

[jerry2623]

What do you think should happen ?

 

[liger79]

I'm not looking for a handout, I’m looking for flexibility. All i need from my bank is to take the NE left when we sell the house and split that debt. Money they already gave us and repayments that we've paid for the last 4-5years without missing a payment. It would work out the same amount per month, But no they want to either keep it as a single debt or run everything thru their lend criteria to see if we qualify. Its all very black and white, no scope for grey areas.

I also believe that the banks should hold up their hands and say, We lent recklessly during the boom and we should shoulder some of the blame and do our best to help people when we can. I don’t think you can just say, ah well you took the loan that’s your hard luck, deal with it.

 

[fizzelina]

people bought property with loans taken out over 20/ 30 years. Why now just because there has been a property drop do they want help.. there loans are long term. There is no such thing as instant gratification. property investment is about time bythe time there loans have been paid back there property will return to the value plus inflation .. Calm is needed. If you bought 3 years ago expecting to exit now with profit you were STUPID sorry

+1
The preoccupation with NE is in my opinion losing sight of the fact these people willingly signed up to a 30 year investment/mortgage (or more in some cases) and the fact that they can't get out of it just yet is not a reason for the country to fund a buy out clause for them. For those couples separating I agree it's an awful situation and the banks should be more willing to look at alternative scenarios like if the mortgage has been paid fully by one person since the split allow that person to take it over. But they should not be writing off NE because a couple split up, that couple took on a long term investment together. They have to take responsibility. The sense of entitlement is indeed making people forget their own responsibility.

 

[MrMan]

I totally agree with this Irish people seem to have such an attitude of entitlement. I think a lot of people here could do with living abroad for a while to see how much tougher life is in other places....even in somewhere like the US if ppl saw the projects over there and these places it might open their eyes. Thanks to the 'celtic tiger' (I hate that phrase though I have to say haha) ppl's expectations are just ridiculous here....

We have our own 'projects' over here, take a drive around your own country if you want to see that there are haves and have nots. The Celtic Tiger was of great benefit to many, but plenty more never saw any real change in their world.

 

[canicemcavoy]

Negative quity is some form of contraception? This is one of the biggest entitlement hangovers of the Celtic Tiger. There is nothing wrong with starting a family in an apartment/small house.

+ 1

Margaret Thatcher was wrong; there is such a thing as society. However, society doesn't owe your child a playroom.

 

[truthseeker]

I dont see NE as a problem where the only issue is a sense of 'entitlement'.

However - I do see it as a problem where people need to sell for one reason or another - the examples I am talking about are relationship break up, loss of employment, loss of opportunity (by this the specific example I am thinking of is a friend who was offered a good career opportunity abroad but rent here wouldnt cover his mortgage, and pay in the new career would take a few years to get to a level where he could add to rent to cover the mortgage) or being forced to take a lower paid job.

I see a lot of people who are in one or other of the above situations. The age profile of my social group means most who bought did so in the last 8 years. And none of them bought 3 years ago hoping to make a profit. They bought, in most cases, because high rents + saving for a deposit was costing more than a mortgage repayment. They werent trying to live on credit, they were just trying to live their lives.

I think a lot of people who dismiss NE as any kind of problem assume that people in NE are there because they were frivolous, stupid or not thinking in the long term.

I see the reality of it differently, some things are beyond planning for, like relationship break up or lack of employment, or being forced to take a lower waged job. If you could sell your home and trade down or rent you might be able to handle the above situations, but not being able to sell only compounds the misery and I do personally know a number of sensible people who are in NE and suffering because of some other situation beyond their control.

To dismiss the problem as people being frivolous, stupid, or not thinking in the long term is not looking at the bigger picture.

 

[queenlex]

People are still unprepared to take responsibility for their own decisions.

Could we look to the past and the intense financial problems Irish people and people all over Europe - have had over the years? In times of difficulty people were prepared to do what it took to deal with their problems, they cut their cloth to suit. So for example (researching family history thanks to the recent online census) many, many people, inlcuding my grandparents who I had previously understood were regarded as prosperous - took in paying guests to make ends meet. They certainly didn't have holidays - not even in Ireland let alone abroad but they saved for their children and their children's education. Have we experienced anything to compare with Germany after WW2?

On the radio during the week I heard a woman explain how badly off she was - so impoverished that, while she could afford a 2 week holiday abroad with her kids she would be really stretched when it came to back to school expenses. The interviewer sympathised instead of asking why she wasn't saving the holiday money.

This sums up the problem P...to be frank and honest greed/the inability to cut back on an unsustainable lifestyle is a lot of the problem and in the first place a lot of the problem was a keeping up with the jones type of situation, e.g. ppl taking pride in how much they'd paid for their house particularly or car, etc. I dont think its true to say you cant bring up kids in apartments either they do it on the continent all the time though maybe some ppl would ideally like a house to bring up kids this just may not be possible....

 

[queenlex]

We have our own 'projects' over here, take a drive around your own country if you want to see that there are haves and have nots. The Celtic Tiger was of great benefit to many, but plenty more never saw any real change in their world.

I absolutely agree with you but some of them in the US are more like shacks I was thinking more of how basic they are in some countries I havent seen anything like that yet here though thats not to say some are not of pure quality. Most ppl I think lived much the same lifestyle throughout this 'great' time and only a relatively small section got rich/pretty wealthy.

 

[Mpsox]

Personally, I am probably just about sliding into NE. I was fortunate in that we had a good deposit and sold a house near Dublin at the peak to move to a cheaper rural town. having said that, we could have bought a far bigger house for a bigger mortgage but didn't because firstly we didn't need it and secondly we wanted to have a big chunk paid off the cost of our new home at the start. So what impact does NE have on me.

In truth, from a day to day living perspective, zero impact. I am probably paying more for my house in mortgage payments on a monthly basis which does annoy me a bit, bit I have always looked at any house I owned as my home, not as an investment property. A mortgage is also a long term committment and I think there is a reasonable assumption that in 22 years time, when I have it paid off, that the value of my house will have increased.

I'm in full time employement and have no desire to move jobs. NE would impact me if I lost my job as it could impact on my ability to relocate for work and this potentially I could be a draw on the state for longer. It would also increase the chances of me taking a job on a lower salary die to restrictions on relocation.

Ne would also impact if my personal circumstances changed, eg divorce/seperation as it would certainly complicate any issues there.

I have no sympathy for anyone in NE on investment mortgages, especially anyone who was on interest only. If you did not accept/understand the risks of your investment and thought you could simply earn money without adding/inputting any value then you were a speculator, not an investor. Frankly, anyone who took out interest only mortgages on investment properties was an idiot and need to deal with the results of their stupidity. Just because the bank was offering the money, doesn't mean you had to accept.

I also believe that there may be genuine cases of mis-selling, especially where brokers and banks encouraged people to be "flexible with the truth" on application forms. They have to take some responsibility for their actions and I do feel that down the line, we will see court cases regarding mis-selling in the same manner as in the UK in the recent past regarding endownment mortgages

I have some sympathy for people who were trying to get on "the ladder", but it is tempered by the fact that in a lot of cases, they were looking to make a quick profit in a short few years to take the next step. Quick profits usually imply large risks and people did not take the time to understand what they were getting into. My sympathy is also tempered for people who took out 100% mortgages, never saved, spent what they earned on plasma TVs and what ever else. Some of the mess they are in, is of their own making.

I have a lot of sympathy for people who borrowed prudently, whose circumstances have changed, or who bought a house as a home rather then as an investment property or looking to make a profit on it, and are now unable to move on. Those are the people who require assistance in my book

 

[queenlex]

people bought property with loans taken out over 20/ 30 years. Why now just because there has been a property drop do they want help.. there loans are long term. There is no such thing as instant gratification. property investment is about time bythe time there loans have been paid back there property will return to the value plus inflation .. Calm is needed. If you bought 3 years ago expecting to exit now with profit you were STUPID sorry

I admire your honesty its a pity some of the media cant be more honest and less populist theres always a way around this problem ppl just need to be realistic. Instead its like "poor so and so needs help because they didnt make a ten grand profit in three years" if they wanted to make a profit or be sure they didnt lose money they need to be patient and in it for the long haul...

 

[Complainer]

Frankly, anyone who took out interest only mortgages on investment properties was an idiot and need to deal with the results of their stupidity. Just because the bank was offering the money, doesn't mean you had to accept.

While I generally agree with you, don't forget that our tax system actively encourages investors to go interest-only by allowing uncapped interest relief. Investors are better off going interest only and keeping their capital on deposit than reducing their mortgage balance, thanks to the state subsidy on interest payments.

 

[liger79]

Instead its like "poor so and so needs help because they didnt make a ten grand profit in three years" if they wanted to make a profit or be sure they didnt lose money they need to be patient and in it for the long haul...

Was that your opinion when the boys down the Dail were pouring billions into the banks of this country?

You can't just paint everyone with the same brush and if you think that people dont derserve or need help then you are very very wrong. Its easy to be smug when your looking down on others.

 

[Mpsox]

While I generally agree with you, don't forget that our tax system actively encourages investors to go interest-only by allowing uncapped interest relief. Investors are better off going interest only and keeping their capital on deposit than reducing their mortgage balance, thanks to the state subsidy on interest payments.

Absolutely agree with you, but how many "investors" actually kept their capital on deposit?, in fact, how many "investors" actually had any/much capital at all?

 

[annR]

Ne

I have no sympathy for people who are complaining about not being able to make a profit etc like they did before, or who won't cut back blah blah. But it irks me to see the banks being so inflexible with people who have good reasons for trying to sell but can't, who are willing to pay their debt but just need to sell for job reasons or whatever. The banks have just been bailed out by the country they have no place being an obstacle to people who are trying to negotiate something reasonable. Well I think the recent government announcement covers some of what I'm talking about, just some flexibility but without letting people out of their debt.

 

[RIAD_BSC]

Negative quity is some form of contraception? This is one of the biggest entitlement hangovers of the Celtic Tiger. There is nothing wrong with starting a family in an apartment/small house.

Have you ever tried to raise kids in a one-bedroomed box apartment?

People in situations like this are not looking for handouts or bailouts or money from anyone. What they want is to be allowed transfer their negative equity from one property to another with the same bank.

In my situation, I bought small property that is now entirely unsuitable for my family's needs (and myself and my wife are probably best placed to judge what does or what doesn't meet our needs).

The loan (at 75% LTV) of a suitable sized home, plus the negative equity carry over on my current property, is well within my budget and affordability criteria, under any stress test scenario. We both have solid, sizeable incomes.

Renting out our current home and renting a more suitable property, something that is often suggested as a solution, is not a real runner for several reasons: the rental market in my area is hugely depressed because of over-supply.. renting it out at all, at any rent, would be a stunning achievement; I would be breaching the covenants on my mortgage because it would no longer be my PPR; I would be liable for tax on the rental income.

There is also the fact that I would become an investor in the property market. I don't want to be an investor, I want to be a homeowner - I never bought my property to make money. I bought a home - it just so happens not to be big enough anymore. I also don't want to raise my children in rental properties because I want them to have stability in their lives - renting is a temporary solution and the landlord can always take the property back if they want to sell it. And that will happen as soon as the market recovers at all..... I don't want to move my children from house to house every year or two....

I can easily afford to move house; the bank is already on the hook for the negative equity anyway; the bank's loan would be secured on a better asset; the negative equity would be reduced because of an injection of equity by me in the form of the deposit for the new house..... but the bank won't allow me to sell and move because, they say, the Financial Regulator has warned them off providing negative equity mortgages.

Can you not see how frustrating that is for someone like me? I don't want a handout from anybody - I have enough money of my own. I don't want to live in a mansion. I'm not frivolous or stupid or greedy. I just want to move house.

 

[liger79]

Can you not see how frustrating that is for someone like me? I don't want a handout from anybody - I have enough money of my own. I don't want to live in a mansion. I'm not frivolous or stupid or greedy. I just want to move house.

+1


Unfortunatly some people here dont see it that way.

 

[orka]

In my situation, I bought small property ...
The loan (at 75% LTV) of a suitable sized home, plus the negative equity carry over on my current property, is well within my budget ...
the negative equity would be reduced because of an injection of equity by me in the form of the deposit for the new house.....
but the bank won't allow me to sell and move because, they say, the Financial Regulator has warned them off providing negative equity mortgages.

I'm really confused by this. If you have a 25% deposit (plus stamp duty/fees) for a larger property, why not use this to pay off the negative equity on the smaller property? Are the properties so similar in price that 25% deposit for the house doesn't pay off the NE on your small property? You might then have to get a 90% LTV mortgage but with sizeable salaries that shouldn't be a problem. I thought the big NE problem was that people were facing having to get 100% LTV mortgages plus service NE debt on the old property.

 

[queenlex]

Was that your opinion when the boys down the Dail were pouring billions into the banks of this country?

You can't just paint everyone with the same brush and if you think that people dont derserve or need help then you are very very wrong. Its easy to be smug when your looking down on others.

I wasnt saying everyone was in it for a quick buck sorry if it sounded like that. I think its a disgrace some of the policies that were in place and dont agree with some of those banking decisions but human greed in general in this country was needed to allow the banks to lend this money too so ppl who borrowed way beyond themselves in some cases recklessly need to accept its not totally the banks fault after all they are capitalist institutions trying to make as much as possible for their shareholders though they changed into big slot machines...encouraged by government policies of course.

I wasnt being smug I just think the level of greed in this country overall the last few years was sickening and some ppl sold their soul and would do anything for a few extra quid...when somebody is making a fortune other ppl are generally suffering...thats the nature of capitalism (particularly when its basiscally unregulated) you know. On a positive note I think the country is more friendly recently due to the end of this getting rich quick nonsense....