Mortgage totals. Why do you pay back double?

stepbar

Credit card debt is the biggest scurge on this island. Hell anyone can pretty much get a credit card these days and easier than a corresponding loan of the same amount. The amount of people I see just paying off the minimum on cc's is crazy. I work in lending and (well my bank is) we would be fairly tight on personal loans. Short term debt is the real problem. We have a lot to thank the Germans for

antoinolachtnai

Well, you also have to look at the end result. Even if some people end up bankrupt (and it is a terrible thing if they do and it should be avoided if at all possible) there is still a vast amount of housing and other infrastructure in place now.

I don't think we have anything as bad as the US sub-prime crisis. I'm sorry, I just don't see it here. You are probably right that the same underlying factors are here, but I don't think we've gone to near the same extent. I'm not saying for a minute that this is because of our brilliant economic management. Maybe we were just lucky. The relative youth of our population probably gives us some latitude.

I think it is a bit much to blame these problems on the banking system, certainly the banking system alone. The ECB has a paper about this where they analyse underlying factors behind property price inflation. The main driver, they argue, is not low interest rates or easy availability of money, but the extent to which property provides a tax shelter.

There are very substantial tax incentives in Ireland for investing in property (as there are in Spain, another country that has experienced big price rises for housing).

beeno67

smccarrick wrote: »

- leading to the biggest boom and bust cycle that this country has ever seen.

S.

More than a slight exaggeration since we have no bust at all.
And who are "the generation of the dispossessed"?

The_Conductor

beeno67 wrote: »

More than a slight exaggeration since we have no bust at all.

Really? We're in the middle of it. House prices are imploding, while those of commodities are soaring, and our unemployment figures are rising at their fastest rate since 1987. Government finances are screwed, and as members of the Eurozone their capacity to borrow is limited to 3% of GDP- while the average punter in the street is similarly living with screwed finances- and very little prospects of them improving anytime soon. I really think that there is a slight disconnect from reality if you suggest that we have no bust at all- as its happening on several discrete levels around us.

The_Conductor

beeno67 wrote: »

And who are "the generation of the dispossessed"?

Those who bought into the hype regarding "having to get on the property ladder" and have purchased totally unsuitable properties, with the intention of "trading up" when the opportunity arises- but have now discovered they own largely unsaleable properties- or only saleable at such a discount to its original purchase price as to be the same. In most cases those who purchased property over the past 12 years have had to do so on the basis of dual salaries- totally realigning the domestic structure to "Dual-Income-No-Kids" in very many cases. There is no easy way to escape from this hole we've dug for ourselves.

beeno67

smccarrick wrote: »

Really? We're in the middle of it. House prices are imploding, while those of commodities are soaring, and our unemployment figures are rising at their fastest rate since 1987. Government finances are screwed, and as members of the Eurozone their capacity to borrow is limited to 3% of GDP- while the average punter in the street is similarly living with screwed finances- and very little prospects of them improving anytime soon. I really think that there is a slight disconnect from reality if you suggest that we have no bust at all- as its happening on several discrete levels around us.

We have one of the fastest growing economies in Europe. Our inflation rate is less than 5%, a rate we could only dream of in the 1980s. We have a national debt so low it would be unbelievable to anyone 20 years ago. We have so much employment 10s of thousands of immigrants come here every year. Yes property prices are falling but hardly imploding. Things are not as good as a few years ago but they are still pretty good. The average person is hardly screwed.

beeno67

smccarrick wrote: »

Those who bought into the hype regarding "having to get on the property ladder" and have purchased totally unsuitable properties, with the intention of "trading up" when the opportunity arises- but have now discovered they own largely unsaleable properties- or only saleable at such a discount to its original purchase price as to be the same. In most cases those who purchased property over the past 12 years have had to do so on the basis of dual salaries- totally realigning the domestic structure to "Dual-Income-No-Kids" in very many cases. There is no easy way to escape from this hole we've dug for ourselves.

Only people who bought a property in the last 2 years face negative equity. Yes many investors will face problems but that is the risk of investing. It is now easier for people to trade upo not harder. The properties they will be moving to will have lost more in value. The only owner occupiers in any kind of trouble are those who bought in the last 2 years and planned to move to a smaller house. Hardly a generation of dispossessed.

The_Conductor

beeno67 wrote: »

We have one of the fastest growing economies in Europe.

Not anymore- 8 of our EU partners, 3 of whom are also Eurozone members, have rates higher than ours.

beeno67 wrote: »

Our inflation rate is less than 5%, a rate we could only dream of in the 1980s.

It was 4.8% in February- an increase on the annual rate of 4.3% in January, and a monthly increase of 1.2% in the HCPI. The greatest increases are from food, housing and fuel- and are not expected to fall anytime soon. We're not doing badly in a European context- particularly as countries such as Latvia currently have rates of almost 16%. Unfortunately the inflation rates have been quoted by the ECB as why it cannot decrease interest rates- and may in fact have to increase them- which in turn is feeding into public pessisism.

beeno67 wrote: »

We have a national debt so low it would be unbelievable to anyone 20 years ago.

National debt has decreased from 145% of GDP to 41% of GDP- however this has largely been achieved by a transfer of wealth from the private to the public sector (private sector debt went in exactly the opposite direction- from 36% in December 1984 to 148% in December 2007).

beeno67 wrote: »

We have so much employment 10s of thousands of immigrants come here every year

We had estimated net emmigration of 45,000 in the final quarter of 2007, and CSO have noted similar trends for 2008 todate (from the Quarterly National Household Survey). Tens of thousands did come here- hundreds of thousands came- but they are leaving once again.

beeno67 wrote: »

Yes property prices are falling but hardly imploding.

They fell on average by over 7% in 2007 and according to Jerome Casey, an economist employed by the CIF (i.e. probably a very optimist forecast), will fall by at least 5% in 2008 and accelerate to between 5-10% in 2009. Falls have been particularly pronounced in apartment prices- almost 280,000 of which have been built in the last 5 years. Those figures are the optimistic figures from the CIF. The pessimistic figures are far worse.

beeno67 wrote: »

Things are not as good as a few years ago but they are still pretty good. The average person is hardly screwed.

Over 20% of people randomly surveyed by Independent Newspapers on the first week in February stated they have severe difficulty in meeting their financial commitments. Annecdotal evidence is that increasing amounts of Irish mortgages are in default- as is evidenced by the numbers of foreclosures in the courts (but these are extreme cases as lenders are trying to make alternate arrangements where possible). I only know figures from 1 of the Irish credit card issuers- but they show almost 40% of people only making minimum payments on credit cards.

I'm worried- I'm seriously worried.

beeno67

smccarrick wrote: »

Not anymore- 8 of our EU partners, 3 of whom are also Eurozone members, have rates higher than ours.

As I said one of the lowest in Europe

It was 4.8% in February- an increase on the annual rate of 4.3% in January, and a monthly increase of 1.2% in the HCPI. The greatest increases are from food, housing and fuel- and are not expected to fall anytime soon. We're not doing badly in a European context- particularly as countries such as Latvia currently have rates of almost 16%. Unfortunately the inflation rates have been quoted by the ECB as why it cannot decrease interest rates- and may in fact have to increase them- which in turn is feeding into public pessisism.

As I said less than 5%

National debt has decreased from 145% of GDP to 41% of GDP- however this has largely been achieved by a transfer of wealth from the private to the public sector (private sector debt went in exactly the opposite direction- from 36% in December 1984 to 148% in December 2007).

As I said unbelievable low national debt

We had estimated net emmigration of 45,000 in the final quarter of 2007, and CSO have noted similar trends for 2008 todate (from the Quarterly National Household Survey). Tens of thousands did come here- hundreds of thousands came- but they are leaving once again.

As I said 10s of thousands coming here

They fell on average by over 7% in 2007 and according to Jerome Casey, an economist employed by the CIF (i.e. probably a very optimist forecast), will fall by at least 5% in 2008 and accelerate to between 5-10% in 2009. Falls have been particularly pronounced in apartment prices- almost 280,000 of which have been built in the last 5 years. Those figures are the optimistic figures from the CIF. The pessimistic figures are far worse.

As I said property prices falling, hardly imploding. 20% drop in 3 years

Over 20% of people randomly surveyed by Independent Newspapers on the first week in February stated they have severe difficulty in meeting their financial commitments. Annecdotal evidence is that increasing amounts of Irish mortgages are in default- as is evidenced by the numbers of foreclosures in the courts (but these are extreme cases as lenders are trying to make alternate arrangements where possible). I only know figures from 1 of the Irish credit card issuers- but they show almost 40% of people only making minimum payments on credit cards.

As I implied 80% are not having severe difficulties meeting repayments (and I would be very dubious of that survey)

I'm worried- I'm seriously worried.

Things are not as good as they were but it is hardly a disaster

markpb

beeno67 wrote: »

Things are not as good as they were but it is hardly a disaster

Not now but these things tend to accelerate. Right now, a few people are worried, some people are having problems selling their houses. If it continues, buyers will leave the market, people will be unable to sell or will have to leave themselves in negative equity.
At the same time, people who had counted on buying to let a 2nd or 3rd room or a 2nd property as an investment property (i.e. not professional investors) will find their finances becoming tighter and, as people start to leave the country, getting someone to rent will be harder. Then the companies who supply or support the construction industry (this is a huge, huge sector) will start letting people go. No salary and no tenant means problems paying the mortgage.

In the same way that people didn't believe a downturn was coming in 2007, people now don't believe it will continue or get worse in 2008.

Edit: This just popped up on RTE News

Up to 50 jobs are to be lost at a Balbriggan company due to the downturn in the construction industry. Wavin, Europe's leading supplier of plastic pipe systems, currently employs 198 people in Ireland. In a statement, the company said the decision to cut its operations in Ireland was a direct result of the decline of the Irish construction market.

The_Conductor

been067-

emigration, not imigration, of an estimated 45,000- thats 45,000 people leaving the country- not the other way around, and markpb stated- accelerating..... You said "As I said 10s of thousands coming here"- not anymore- there were, past tense, now they are going home again. With the increase in wages in Poland and the devaluation of sterling- a lot of Polish people now feel their standard of living is higher back in Poland than it is here, which is quite a turn around (coincidentally the quarterly household survey also upped the number of Polish presumed resident in this country by about 115,000- which now concurs with figures from their consulate). So- its back to 10s of thousands of people leaving again.......

Regarding inflation- while headline inflation is just under 5%- its increasing over 1.2% month on month- which is a pretty shocking amount. In the 1980s we got around our inflation problems by devaluing our currency- that is not a possibility now, so unless people's salaries increase by greater than the rate of inflation- their real purchasing power is eroded, plain and simple.

Viewing our public sector debt as unbelievable, is looking at the situation with blinkers- as you are totally ignoring the private sector debt- which as I have pointed out has soared.

The 3 year 20% drop in house prices is according to the CIF- who are the largest vested interest in the market. Apart from anything else this is presumed to relate to new house prices- and even this is masked by unusual incentives to try to minimise price falls. Irish property watch, DAFTwatch and several other sites, including this one, register much higher decreases in secondhand property prices.

I would also seriously challenge your statement that only people who purchased in the last 2 years are facing negative equity. I would make a qualified statement that the vast majority of apartment purchases from the last 3 years are in negative equity, and in some locations (as documented on the house bubble bursting thread) are even below prices in their respective areas from 6 years ago.

I think we'll have to agree to disagree- as we're not going to meet minds on this one.

beeno67

ESRI predicts 60000 people migrating to Ireland and between 30-50000 emigrating. A net immigration of 10000
ESRI predicts inflation of 3.4%
National Debt will approach 30% of GDP from 25% in 2006 (not 45% as you said)
As I said things are not that bad and not a disaster.