Why do the banks not do negative equity mortgages?

[Guest105]

There is a huge difference - but this difference needs to be looked at in context. Some years ago it was more common for only one partner to work, mammies tended to stay at home, there was only one salary in the family. People did not have such high levels of professional qualifications, their salary expectations were lower.


Attitudes will always change with time but it is frustrating for someone like me (and no doubt others in NE) who was actually sensible and did not over extend themselves to find themselves being dismissed with 'people these days dont know the value of money' - when it is just not true.

If I had held off buying a property because of the bubble I would only now be in a position to buy and possibly unable to get a mortgage due to reduced earnings etc.... So maybe in a position where I could have been in my 40s before being able to buy a home - do people really think that entire generations were going to wait until their 40s to buy homes? It just doesnt make any sense.

Truthseeker I was not referring to you or others like you who are struggling to pay mortgages (whether in negative equity or not) on average salaries but to the guys Riad was referring to who are on the €100,000 - €150,000 salary bracket. I know only too well the misery that has been inflicted on people because of this housing crash.

In the UK the average age of a first-time purchaser buying without assistance is 38, although it is unlikely that will happen in Ireland seeing as prices have dropped so much.

 

[orka]

In the UK the average age of a first-time purchaser buying without assistance is 38, although it is unlikely that will happen in Ireland seeing as prices have dropped so much.

What the article describes is actually quite similar to what is happening here - banks aren't lending money easily and only to those with big deposits (>25% of the price) - so that will naturally be older people who have had more time to save...

 

[Oscaresque]

I am not advocating it on a long time basis but as a shorterm solution.

But if I were to have a child now I don't know that it would be a short term situation. It could end up long term say 10 years.

I find it quite amusing that young couples on this thread are on €100,000 + joint incomes and yet they are not prepared to save and pay off their negative equity.

I know you are not necessarily referring to me, but to be clear, I do not have 100k+ salary, I am absolutely prepared to pay off my full mortgage and have never suggested that I wouldn't and I am saving as much as I can every month.

My own plan at the moment is to, save, save, save, save , save and hope that within the next 6 years A) my bank allows me to move to a new home with a new mortgage that takes with it the gap between what I can sell my house for and the mortgage B) they let me sell the house and pay off the NE in a loan and rent while we pay this off C) continue to live here and save enough to pay off the NE and have a deposit for a new home.

C is looking like the most likely outcome but I don't think I can save that amount. Maybe house prices will rise and lessen some of the NE, who knows.

 

[taxedparent]

There are 3 types of people in Ireland at the moment:

a) bought an overpriced property(s) in the last 10 years
b) Coming to end or close to end of mortgage
c) Does not have a mortgage

All this talk of debt forgiveness/trading up with neg equity only really applies to one type of person. Why should an a) get preferential treatment over a b) who didn't over extend themselves to a c) who realised that everything was over priced and was not a sheep.

You make your decisions in the financial world, unfortunately they can go two ways, the good way and the really really bad way but that is ultimately your responsibility and I feel everyone should be fully accountable for their own actions.

 

[Mystic Oil]

There are 3 types of people in Ireland at the moment:

a) bought an overpriced property(s) in the last 10 years
b) Coming to end or close to end of mortgage
c) Does not have a mortgage

Not wishing to detract from your point, however...

a+b may be true for some
a+c may be true for others

 

[oldnick]

Well, taxed parent, maybe people in group (a) were a young couple with a child that needed a home and did not have your brilliant perception regarded the overpriced housing bubble or the forthcoming economic crisis.

Furthermore, these ordinary young Irish citizens were constantly bombarded with "expert" advice from their own banks, the media and government -buy,buy,buy - here's loads of money. (And that's besides the enormous peer pressure at the time.)

Also, perhaps that young couple didn't quite foresee that one or both of them would be jobless in a couple of years. You evidently foresaw the economic crisis and I congratulate you for your foresight.

Now, if none of the banks, nobody in government, few in the media foresaw all this are you seriously stating that those people who,like all of us, depend on advice from experts, and are now suffering should be " fully accountable".

What, taxed parent, do you mean by that ?

Old Nick
(another taxed parent)

(i assume that, with your perceptive analysis of the housing market, you sold your house during the peak of the bubble , made a killing and then rented a similar house . If not,why not? - I can't understand all these people who "knew" there'd be crash but never did a thing to benefit from it)

 

[JoeB]

Yes, an ability to see through advertising should be taught in schools. If people want to outsource their common sense to other people that's fine, but you can hardly complain if the people you choose to lead you actually mis-lead you instead.

I think our government and supposed leaders do have a lot to answer for, but unfortunately they cannot fix the problems.

It's wrong to say that no-one knew. The banks knew. Economists knew. The problem is that our government actively rubbished people who spoke the truth, and our country is run on soundbites, not considered policies. So our government actively mislead us, and pursued policies that were very ill advised, even at the time.

Many people wanted the property market slowed down, and instead the government does the opposite, and offers incentives to speed it up even more. So the fundemental problem is lack of leadership, and refusal of government to accept that they can make mistakes, and the refusal of of sucessive goverments to follow good policy, instead of having unaffordable giveaway budgets like we did have for many years.


There is no solution to bad leadership, except replace the electorate, and get an electorate that won't continually vote in semi-criminals and lyers.

So the problem very fundementally is the Irish people, and our inability to stand up for ourselves, and our inability to chooose leaders that would be good for the country, instead of voting for semi-criminals.

Of course the system is such that it encourages semi-criminals to apply. The lack of transparancy is indicitive of this.

 

[Complainer]

Yes, an ability to see through advertising should be taught in schools.

Absolutely.

 

[oldnick]

JoeB- I agree with most of what you say but can't understand the openimng line
"..if people want to outsource their common sense to other people that's fine, but you can hardly complain etc etc ..."

In every society people have diffent areas of expertise. We have financial, medical, technical etc etc experts. Even gardeners and decorators are experts to whom we look for advice.
Bankers are people who we had assumed were welltrained, honest and expert in financial and economic matters. That they were greedy and selfish did not matter as long as we thought they knew what they were doing.

How can heeding the advice of experts be described as "outsourcing their common sense" ?
Surely it was, at that time, "common-sense" to listen to the experts ?

Now, in 2011, it seems so many people "knew" in 2003-6 that the property prices would halve and that there'd be an economic collapse.

Many of my friends now claim the same . But I ask them the question I asked above

"If you "knew" that property prices would collapse, and you owned a house worth in 2006 one million ,which was not an uncommon price amongst my middle-class elderly friends, , "knowing" that you'd get the same house for half the price in 2011 -why did you not sell knowing you'd make a clear half-million profit !"

Many of my friends have second homes/investment properties and ,again, despite their great hindsight, only a couple of them sold in 2006 . Most of them held on to properties which are worth under half. Why ? Why,if they all knew about the forthcoming property bubble.

Methinks a "false memory syndrome" is in play. Other than the odd article in the Economist or warnings from McWilliams, very few believed really foresaw such a collapse.

It'd make an interesting psychological study to observe how everyone nowadays states that it was obvious/clear/common-sense that buying/investing property in 2003-6 was stupid without any of them having acted on that knowledge.

 

[orka]

"If you "knew" that property prices would collapse, and you owned a house worth in 2006 one million ,which was not an uncommon price amongst my middle-class elderly friends, , "knowing" that you'd get the same house for half the price in 2011 -why did you not sell knowing you'd make a clear half-million profit !"

But you wouldn't necessarily get the 'same' house again for half price - you might have to make do with a similar one. My house is my home, not a commodity that I will trade up and down to make money so whether there's negative equity or lost equity, I don't really care - we'll just keep paying the mortgage until it's paid off, per the original plan when we bought. Even if someone knocked on my door today and offered me the peak-price, I don't think I'd sell.

Many of my friends have second homes/investment properties and ,again, despite their great hindsight, only a couple of them sold in 2006 . Most of them held on to properties which are worth under half. Why ? Why,if they all knew about the forthcoming property bubble.

Maybe you should try asking those who DIDN'T buy why they didn't. We looked at investment properties during the peak years but a simple spreadsheet showed that you needed strong capital growth ad infinitum to make it an attractive proposition - so we stayed clear.

So, I didn't profit madly from my decisions and nor did I lose wildly so I don't think it's fair to say that only those who actively traded and profited from the bubble saw it coming or did something about it - doing nothing was an okay choice too.

 

[taxedparent]

Well, taxed parent, maybe people in group (a) were a young couple with a child that needed a home and did not have your brilliant perception regarded the overpriced housing bubble or the forthcoming economic crisis.

Please dont take my post as an ego boost, Im really not trying to say this at all. Just because you have a family doesn't mean you have to go out and buy a house. You can rent/house share etc its not an automatic go buy a property. All around me friends family etc were goading me into why I wasn't being "adult" by buying house for the birth of my kid etc. I just didn't listen to them, they weren't the ones having to pay the money back so I didn't feel it was important for them to tell me what to do. There is a big problem in the country around the perceived right thing to do (property ownership), its just the done thing and I couldn't justify paying 400-500k for something that cost 70-80k to build.

Furthermore, these ordinary young Irish citizens were constantly bombarded with "expert" advice from their own banks, the media and government -buy,buy,buy - here's loads of money. (And that's besides the enormous peer pressure at the time.)

Same answer as above really, nobody forced them to do anything. The looked at the options, made an informed decision and went with it. The consequences of a good/bad decision remain firmly on the decision maker. We are trying to make the people higher powers accountable too so why shouldn't it be any different to the people who bought into it.

Also, perhaps that young couple didn't quite foresee that one or both of them would be jobless in a couple of years. You evidently foresaw the economic crisis and I congratulate you for your foresight.

If your going to borrow large sums of money from the bank, and you don't think about the future I would put this down to a signifancant oversight on the decision maker. You have to plan for the worst to see if it works out or not. I definitely do agree the banks didn't do enough stress testing on borrower, but some of this responsibility does also lie with the borrower too.

Now, if none of the banks, nobody in government, few in the media foresaw all this are you seriously stating that those people who,like all of us, depend on advice from experts, and are now suffering should be " fully accountable".

Correct my view point hasn't changed since reading your post, if anything it has compounded my belief that there shouldn't be an preferential treatment(debt forgivenes/mortgage bonus etc) for people who made bad decisions throughout the boom times.

Everyone is now paying for this in some way or another through higher taxes/charges/duties etc. It galls me further that there is an expectation that any kind of "forgiveness" should be on the table.

What, taxed parent, do you mean by that ?

Old Nick
(another taxed parent)

(i assume that, with your perceptive analysis of the housing market, you sold your house during the peak of the bubble , made a killing and then rented a similar house . If not,why not? - I can't understand all these people who "knew" there'd be crash but never did a thing to benefit from it)

I thought of buying a house around 2005. I didn't really know anything about how it worked, what you had to do etc. After going through all of ads, docs, asking people I just decided that it would be a bad move to pay a crazy amount of money for a house. I didn't make any money on it, but I suppose you could look at now and say I saved myself a lot of grief.

Do look at the flip side, if the bubble hadn't burst and property prices continued their upwards trend I would be in much worse place now thinking about buying a house. It would be much harder to get on the ladder if I hadn't bought in the last 6 years. If that happened would I have anyone to blame but myself?

 

[pjuegos]

The following article from the Sunday Business Post also confirms that BOI will be offering soon NE mortgages:

[broken link removed]