Complainer
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Thanks for the clarification, though I'm now even more scared than I was.
Has anything changed now? Can the banks still gamble and still rely on being covered by the Govt?
Thanks for the clarification, though I'm now even more scared than I was.You are right, but that is what banks do, lend out money at a level of risk they choose. What is ignored by ALL politicians and pretty much all of the media is the question of "Where did the banks get the money from?"
If you want to pinpoint blame then you have to point to government and the central bank. The ECB significantly increased the money supply (created inflation) and lowered interest rates; then banks used that money to lend it out cheaply in a fractional reserve system that allows for up to 50:1 leverage. The ultimate fault lies with government and ECB for their inflationary monetary policy (not some lack of mystical regulation).
Banks also didn't gamble that the bubble wouldn't burst. They knew/gambled that the risks associated to a burst would be covered by governments through interventions/bailouts.
But very, very few made any provisions for the rainy day. If you took on a mortgage that was realistically within your means and you didn't take out a credit union loan to pay for the deposit and furnishing, AND you took into account what would happen if you became un/under-employed, then you wouldn't have much to worry about. But this what people in general did not do.
Ah gwan what a load of crap.
Everything is someone else's fault.
Where is my box of tissues.
I don't. I didn't buy an over-priced house and I spent a considerable amount of time and some expense trying to warn others of the dangers. For my effort, I was told that I was talking down the property, being unpatriotic, etc. After the bubble burst, I was then told I was merely lucky. Now, seemingly, it's all my fault too. I have absolutely no intention of the Fianna Fail scam that "since everyone's to blame, noone is to blame".
I can speak of similar experiences. While I did buy a house in 2004 I sold it again in early 2008. The house I bought was WELL within my affordability, which I was told by friends and colleagues at the time was a monumentally stupid thing to do. When we decided to sell the house people told us we were only fueling the decline in house prices, and the best thing we could do is rent it out and maybe buy another one!?!?!?! Now I have been renting for 2 1/2 years and I'm told I was soooo lucky to have sold my house, but do I not think that paying rent is dead money? There is nothing lucky about making conscious choices and then coming out on top.I don't. I didn't buy an over-priced house and I spent a considerable amount of time and some expense trying to warn others of the dangers. For my effort, I was told that I was talking down the property, being unpatriotic, etc. After the bubble burst, I was then told I was merely lucky.
No, the ECB has not changed its minimum reserve requirements. It has made unlimited funds available to banks and is actively buying bonds even of junk status. At the moment banks are just sitting on these extra funds, because they can borrow at 1% and buy government bonds that pay 2.5% or more. When they decide to lend out the extra funds then you better be prepared for some price increases.Thanks for the clarification, though I'm now even more scared than I was.
Has anything changed now? Can the banks still gamble and still rely on being covered by the Govt?
The reason that they didn't have rainy day funds large enough was because they took on too large mortgages. I recently overheard a conversation where in first time buyer couple had monthly repayments of €1750 for 3 bed duplex somewhere in Dublin. Of course most young people will not have an extra €21000 to cover 12 months repayments. But they should have taken that into account and bought cheaper, or, even better, realised that they could not afford at current price levels.Im not sure I completely agree with this. People may have had rainy day provisions made, but few would have thought it would rain so hard for so long. I have friends who have been unable to find work in their profession for well over a year - would you expect that first time buyers have over a year of mortgage repayments saved? I just dont think that thats a realistic expectation of a first time buyer.
House prices didn't go up because lenders and estate agents overvalued them. They may have put some advertising price on the house, but it is supply and demand that affects sale prices, nothing else. General euphoria and PR from various corners of society may have made people believe that they would end up "being priced out of the market". But guess what happens when enough people are unable to buy above a certain price? Prices stabalise and come down again. Instead of letting this happen, government introduced and modified policies that increased demand even further. There was only ONE way this was going to end.to be fair (and having worked in property for 15 years in Ireland), I think a lot of people feared that if they did not buy then they would never get a foot on the property ladder and to a large extent these fear tactics were essentially fuelled by developers and the government in close cahoots with the banks. Whilst I don't agree with the excessive spending habits of some people during the boom, there are a huge number of first time buyers living in small starter homes that will never be able to get out of the negative equity trap due to the outrageous overvaluing of property at the peak. I think its all too easy to accuse them of overborrowing when those not in the same situation sit in their own ivory tower handing down judgement. I bought a house in 2004 for 224K my neighbour bought the very same house in 2006 for 370K, do I delight in her misfortune? No. I think a lot of people did what they had to do at the period in time and maybe those more fortunate should just back off.
huge number of first time buyers living in small starter homes that will never be able to get out of the negative equity trap due to the outrageous overvaluing of property at the peak.QUOTE]
But they are the ones who decided the value of the property. House prices were crazy because there were people willing to spend huge sums of money on poor housing and plenty more willing to accept.
Of course most young people will not have an extra €21000 to cover 12 months repayments. But they should have taken that into account and bought cheaper, or, even better, realised that they could not afford at current price levels.
In many cases of my own peer group they simply didnt have the option to 'buy cheaper' - they bought the cheapest they could at the time.
but they didn't have to buy, they chose to.
yes i agree absolutely, but you have to look at the context. Im talking about 30 somethings, who were saving for a few years, hoping to buy their own home, trying to rent and save a deposit at the same time is hard work and they were constantly in fear of the fact that the prices kept going up and up, they were at the stage of life of starting a family, and banks were offering people silly money.
Its easy to say 'well people could have rented longer' but in the context of the situation, people did not know that the bubble was going to burst so spectacularly (and no matter how often it is said on here that what was coming was obvious etc...it clearly wasnt that obvious to a huge number of ordinary people or we wouldnt have the situation we have now with thousands in trouble with negative equity or mortgage trouble). And im not talking about greed either, im talking about young people in small apartments or small houses that just wanted to buy their own place.
but they didn't have to buy, they chose to.
Yes I agree absolutely, but you have to look at the context. Im talking about 30 somethings, who were saving for a few years, hoping to buy their own home, trying to rent and save a deposit at the same time is hard work and they were constantly in fear of the fact that the prices kept going up and up, they were at the stage of life of starting a family, and banks were offering people silly money.
Its easy to say 'well people could have rented longer' but in the context of the situation, people did not know that the bubble was going to burst so spectacularly (and no matter how often it is said on here that what was coming was obvious etc...it clearly wasnt that obvious to a huge number of ordinary people or we wouldnt have the situation we have now with thousands in trouble with negative equity or mortgage trouble). And Im not talking about greed either, Im talking about young people in small apartments or small houses that just wanted to buy their own place.
It is easy to say that now.
Can you really see into the future...
This all comes down to the obsession of home ownership.
Its easy to say 'well people could have rented longer' but in the context of the situation, people did not know that the bubble was going to burst so spectacularly (and no matter how often it is said on here that what was coming was obvious etc...it clearly wasnt that obvious to a huge number of ordinary people or we wouldnt have the situation we have now with thousands in trouble with negative equity or mortgage trouble). And Im not talking about greed either, Im talking about young people in small apartments or small houses that just wanted to buy their own place.
"rent - its just not the done thing in this country"
woohoo, let's go buy overpriced houses, renting is not the done thing!
i suppose you have a point, because there had never been a housing bubble anywhere in the entire world before that we could study and learn from, and history never repeats itself.
No, you are not lucky, it sounds more like you made wise decisions as to the amount you borrowed, deposit, and possible lack of earnings in the future. That is not luck, that is financial prudence.I am lucky that I am not in negative equity and when getting a mortgage have always borrowed an amount that I would be able to afford on one wage in case myself or partner was not working.
There were obviously people that were foolish with money but there were also people that wanted to just get their own home and bought into the attitude that there was something wrong with you if you did not own home. Personal responsibility has to come in to it but I can understand how someone would feel under pressure to get on the property ladder.
I agree that the education system does not pay enough attention on personal finance and economics. While financial ignorance explains why so many people are in difficulty, it does not excuse it. Unfortunately the financial "punishment" is the result of making financial mistakes, but it is also of utmost importance to avoid the same mistakes being repeated. Shame that the same wasn't/isn't done with banks.Its easy to say that now, but there are an enormous amount of people out there for whom the words 'study' and 'learn' meant something they did for the Leaving Cert or earlier and never again afterwards. Just ordinary Joe Soaps who believed, as many did, that if they bank told them they could borrow X amount, then it was ok for them to do so. I know plenty of people who couldnt hear me when I told them they were over borrowing, because the bank said it was ok, and if a financial institution was telling them it was ok then that must mean its ok. It may be a strange idea to someone who is financially savvy, but its true.