Why are those who borrowed 100% LTV complaining?

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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?
 

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.
 
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.
 
Ah gwan what a load of crap.

Everything is someone else's fault.

Where is my box of tissues.


Jaysus lads, calm down. Perhaps I should have tidied it up a bit and made it clearer. I too also borrowed wisely so no complaints coming from me and I don't want to accept being at fault when it's not down to people like me or you that borrowed wisely. And Robin, my statement was more directed towards the people that are complaining that they got the 100% mortgages. They had a part to play and the banks had a part to play in it. Therefore, within their own individual circumstances, everyone was 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.

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?
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.
I have spent quite some time searching for financial and banking crises in the past 100 years, and haven't found one, where governemnts didn't intervene. This is the moral hazard that exists now, and the only way I can see this changing is if constitutional amendments are made that restrict government interventions. Because just saying that it won't happen again is not going to make a difference.

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.

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.
 
 
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.
 
C'ést la vie.

When you take a loan of a few hundred K you have to deal with any of the consequences.
 

+ 1
 

I agree that it was not common belief that the bubble would burst spectacularly, or burst at all for that matter. But the unorthodox opinion that was warning of it did exist at the time. So people took on the extra risk, i.e. higher mortgages, that they could only afford at the time, but with no regard for a situation in which their income changed.
If they were not aware of the risk then they were either ignorant or they chose not to pay attention to warnings. This all comes down to the obsession of home ownership. Yes owning your own home is a nice thing if you can truly and honestly afford it. But it has risks and ongoing costs, that have been, and still are being, constantly ignored by the general public.

It is easy to say that now.
Can you really see into the future...

You do not have to try and see into the future to realise that you cannot afford a mortgage above a certain amount!
 
This all comes down to the obsession of home ownership.

It does. But the culture of this country is that owning your own home is the way to do things. We do not have an adult renting culture similar to other european countries. Renting is seen as the domain of the young, those on the move or a stop gap. I dont think I know any older adults (I mean over 40s) who rent - its just not the done thing in this country.

Of course the other thing is that at the height of the boom renting was very expensive. If you were trying to save a deposit to buy at the same time it was really difficult. I moved from renting a tiny 1 bed granny flat to paying a mortgage on a spacious 2 bed apartment (by comparison) and suddenly had an extra 500 quid a month to play with. It made sense to be paying the mortgage rather than paying rent and saving - and I had a bigger place to live that I could decorate the way I wanted into the bargain.
 

Ok taking the point that people in general did not think the bubble was going to burst so spectacularly, would it be fair to say that they might have suspected that prices simply could not continue to go up at the rate they had done for a decade (or else a 1 bed in santry would now cost 500k)?

With that in mind, surely they should have asked themselves if prices don't go up and they do not gain any equity in the short term, can they live in the place they are buying for a good while and be happy?

I cannot claim to know what everyone was actually thinking, but I suspect the answer is NO. They could not see themselves there for any length of time and they did not simply want to "buy their own place", they wanted to get on board the gravy train/property ladder and let it speedily elevate them into the 3 bed semi in south dublin that they actually saw themselves in.
 
Above is a link that may shed light on this subject.
There are a lot of 'should haves', 'could haves', 'should do in the future' and "why it won't be done in the future"
 
"rent - its just not the done thing in this country"

woohoo, let's go buy overpriced houses, renting is not the done thing!

The problem was that every year it looked like houses were overpriced until the next year when they went up again.I remember one of my friends paying 250K about 5 years ago and I thought they were off their head. Then they sold it 2 years later for 381K.

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 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.

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.
 
I suppose people just hoped they would not be buying right at the top of it. Remember all the experts talking about a soft landing. (Has there ever been one?)
As I said , when my friend borrowed 250K I thought it was crazy but year after year the price went up.
I also had a family member that bought an investment property 7 years ago for 230K. I thought they were taking a huge risk but it was worth as high as 400K at the peak.
I don't think there should be a NAMA for home owners but I can understand how people got sucked in.
 
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 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.
 
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