Will the Governnment do anything about negative equity

Photojoe

If the govt does one little thing for all these mongs in NE then that is it. I'm going straight on the dole, scamming it every which way I can. No way am I paying for these cretins who put as much thought into a 500K purchase as they did their overpriced lunch in Eddie Rockets.

thebman

If they do I'm acting as recklessly as possible in the next upturn since I'll be rescued by the government.

Acted responsibly this time, if I'm going to get screwed for it then I'm going to take advantage next time.

Can people begin to see why this is such a crap idea? Its nobodies fault but the mortgage holder that the took out such large mortgages and the property values fell. The banks may have been silly to give them out but those people still accepted them and must now face the consequences.

I don't wish it on anyone but I'm not that nice that I want to bail out a bunch of people who mostly earn more than me a year.

Keith C

meh if someone was stupid enough to pay €300k for 1 bed shoebox or €450k for 2 bed shoebox, I doubt they're worried bout negative equity, sure the value of property can only go up, this is only a temporay blip.

eth0_

mathie wrote: »

A friend of mine thinks the Government will do something for people in negative equity.

No. Why should they? Why should Irish taxpayers bail out idiots who grossly over-borrowed on houses worth 6-10 times their income?

The banks should be penalised for ever offering these mortgages but at the end of the day they didn't force anyone to over-stretch themselves on their mortgage repayments.

thebman

I think a much more realistic outcome would be for the government to request that the banks that have been bailed out, offer mortgage holders the ability to change from fixed to variable rate mortgages with reduced penalties if possible.

There are potential problems with that too but I understand the difficulties people are having and the banks shouldn't be able to just act like they weren't lending recklessly. However, it can't be at teh expense of lending to businesses to create employment and if the banks are spending their time and money reducing pain on mortgage holders then we can't expect them to have the time to work with business which isn't acceptable.

Senna

thebman wrote: »

I think a much more realistic outcome would be for the government to request that the banks that have been bailed out, offer mortgage holders the ability to change from fixed to variable rate mortgages with reduced penalties if possible.

Negative Equity and Fixed rate mortgages have nothing to do with each other and it should not be assumed that by bailing out one you are helping the other.
What they do have in common is that both were entered into willingly and both will come to an end at some point in the future. Nobody held a gun to anyone's head, if you made the decision you should live with it.

Jo King

The government is going to do something about negative equity.

Make a lot more of it!

hobochris

eth0_ wrote: »

The banks should be penalised for ever offering these mortgages but at the end of the day they didn't force anyone to over-stretch themselves on their mortgage repayments.

Why? They are business after all. as a general rule businesses try to earn the maximum profit they can.

This is the governments failing not the banks for not putting legislation in place to regulate lending(i.e. put something in place so you can borrow no more the 5 times your yearly income).

But they let it spiral out of control.If they had done something at the start of the boom the idiots who borrowed more then they could afford would not be in their mess.

The government is meant to act in peoples best interests, in this case they didn't, as it was in peoples interest (especially those who borrowed like there was no tomorrow) to have their credit restricted to what they could afford.

Jo King wrote: »

The government is going to do something about negative equity.

Make a lot more of it!

+1

For once the government doing nothing is the right thing... let the market bottom out to realistic prices.

astrofool

The problem with negative equity is that it prevents mobility, people can't sell up, as they owe more than the property is worth, and can't get a new mortgage due to having to take 100%+ equity in the new place (even if they were just swapping houses of the same value).

The only thing I could see happen is that the government make it easier for people who are already in negative equity to move, perhaps by guaranteeing the outstanding amount with the bank (basically an unsecured loan) during the moving process, allowing mobility.

Otherwise, if you did want to trade up, even if you're in negative equity, now would be a good time, as the difference in house prices is now smaller, requiring a smaller loan to move up. Of course the opposite is true if you want to trade down, meaning we could see a lot of people staying in large houses, when they'd prefer a small cottage or bungalow.

BC

Speaking as someone who is in negative equity i'd have to say no. While i'm annoyed with myself, I do realise that it was all my own doing and don't expect to be bailed out by anyone. There seems to be an assumption that everyone in negative equity is crippled with a mortgage. That is not the case. There are plenty of people like me who are perfectly able to pay the mortgage because it wasn't a crazy sum of money but still paid too much and ended up in NE.

I would also be annoyed if the government bailed out fixed term mortgage holders.

PullOutMethod

Negative equity per se is not the problem - particularly where they can afford the repayments.

The problem is people who bought unsuitable properties because that was all they could afford during the bubble.
I know countless young couples who are now living in apartments, some of them well out in commuter counties.
They want to start families but cannot because there is no room - their property is totally wrong.
They can't move because they are in NE. They cannot even switch lender. They are stuck paying off this debt for 30 and in some cases 40 years.

That is the real tragedy and legacy of Bertie Ahern.
If you were born in the 1970's your life has probably been harmed by this property bubble.

Jaysoose

BC wrote: »

Speaking as someone who is in negative equity i'd have to say no. While i'm annoyed with myself, I do realise that it was all my own doing and don't expect to be bailed out by anyone. There seems to be an assumption that everyone in negative equity is crippled with a mortgage. That is not the case. There are plenty of people like me who are perfectly able to pay the mortgage because it wasn't a crazy sum of money but still paid too much and ended up in NE.

I would also be annoyed if the government bailed out fixed term mortgage holders.

Gotta agree with the above, im in NE aswell but can easily pay my mortage and am not looking for anybody to bail me out as i signed the contract, it has turned out to be the wrong move but there is nothing i can do about it so have to take it on the chin.

Im surprised at the generalisation on this thread 'idiots' 'mongs' etc etc...one person asked the question but people are talking as if everybody in NE is crying their eyes out.

The real idiots in all this are people that took car loans, houses, multiple credit cards and thought that the banks would keep giving them money forever.

I personally dont think the goverment should take over NE as this would further detach people from their own personal responsibilities of their actions.

techdiver

PullOutMethod wrote: »

Negative equity per se is not the problem - particularly where they can afford the repayments.

The problem is people who bought unsuitable properties because that was all they could afford during the bubble.
I know countless young couples who are now living in apartments, some of them well out in commuter counties.
They want to start families but cannot because there is no room - their property is totally wrong.
They can't move because they are in NE. They cannot even switch lender. They are stuck paying off this debt for 30 and in some cases 40 years.

That is the real tragedy and legacy of Bertie Ahern.
If you were born in the 1970's your life has probably been harmed by this property bubble.

If they couldn't afford a more appropriate property they should not have entered the market. This notion of getting your foot on the property ladder has been proven to be a load of crap now that we've seen what has ensued.

I couldn't afford an appropriate property during the boom times with my girlfriend, so we rented and are still renting, happy in the knowledge that some one is subsidising us to live exactly where we want. We can move every year if we see fit and are not tied down.

The problem with Ireland is that there is still this "foot on the property ladder", mindset out there, despite the harsh realities of what has happened and what continues to happen. My opinion is don't buy a place to live unless you plan to live there indefinitely (allowing for changes in circumstance of course).

Duckjob

The chances for a negative equity digout for Joe Soap are between slim and none. The government is clearly saving its bailout euros for their developer mates.

In fact, what with them directing NAMA not to push the big developers to the wall, coupled with more pressure on the banks to open up FTB mortgage credit, it looks like their plan is to transfer the NAMA debt out onto the broad shoulders of a new wave of gullible FTBs.

Electric Sheep

techdiver wrote: »

The problem with Ireland is that there is still this "foot on the property ladder", mindset out there, despite the harsh realities of what has happened and what continues to happen. My opinion is don't buy a place to live unless you plan to live there indefinitely (allowing for changes in circumstance of course).

Yep, so many still think they are going to make their golden fortune from the property ladder and "trading up". It's like they have their hands over their ears going "lalala" because they refuse to believe that there's an easy buck to be made from houses.

thebman

Yeah the same people who are afraid to invest in the stock market or did and thought anything with .com could only go up I imagine.

A lot of people seem to refuse to believe that what goes up will probably come down eventually and may not go back up to the same level it once was.

The_Conductor

Yep- the term is 'irrational exuberance'. Unfortunately its part of the human condition- look back in history- you can bet even the cavemen had their own twist on it. The Dutch tulip mess, brought the theory of mass exuberance into popular culture- but a knowledge of whats happening doesn't seem to infer an ability on people to resist the temptation to join the masses in their quest for untold riches........ The global economy has imparted the ability for another theory- that of the butterfly effect- to be examined in detail. Causal events in one corner of the world can have a devastating effect elsewhere...... In Ireland- we didn't need the causal events of elsewhere for everything to go tits up- we through own ineptitude, provided the perfect scenario all by ourselves......

bobbiw

Typical Irish mentality that they should be bailed out of everything.

They shouldnt.

They didnt turn around and tax people 90% on any increase in the value of their home so why should they turn around and do anything about a fall in value.

i think the goverment is doing way too much as it is.

mathie

techdiver wrote: »

If they couldn't afford a more appropriate property they should not have entered the market. This notion of getting your foot on the property ladder has been proven to be a load of crap now that we've seen what has ensued.
I couldn't afford an appropriate property during the boom times with my girlfriend, so we rented and are still renting, happy in the knowledge that some one is subsidising us to live exactly where we want. We can move every year if we see fit and are not tied down.

The problem with Ireland is that there is still this "foot on the property ladder", mindset out there, despite the harsh realities of what has happened and what continues to happen. My opinion is don't buy a place to live unless you plan to live there indefinitely (allowing for changes in circumstance of course).

Hindsight. 20-20.

You know I've been on boards a long time.
I saw the masses telling people to get on the property ladder and now I see the masses saying don't buy.
The herd behaviour is interesting to say the least.

Isn't there some theory out there that suggests to do the opposite to populist thinking?
Like when everyone is full on sure that Man Utd will beat Barcelona as they've 3 of their regular defenders missing then it's a good idea to bet the other way.

Now I'm not saying we're at the bottom I'm just saying the hysteria we saw at the top will be all to scarily familiar at the bottom.

techdiver

mathie wrote: »

Hindsight. 20-20.

For some people maybe. It was obvious to some that this was essentially a pyramid scheme and like all such schemes was doomed to collapse. I do agree about the herd mentality, it's a funny human trait. When one person sees his neighbour doing something, he automatically will try to replicate it.

The problem is that we will not learn from this unfortunately. We will be back here in 20 - 30 years time talking about the same thing again and of course when that time comes people will proclaim - "Ah yea, but this is different!"

antoinolachtnai

The best thing the government can do for people in negative equity is to help increase the value of their homes again, by ensuring that there are excellent, inexpensive public services available to these homes. In particular there needs to be very good public transport.

gurramok

Ain't hindsight here. I've been speaking about this issue since at least 2006 in this forum and where did i get my knowledge from?

Good old fashioned research on the biggest purchase of my life.

Still, if one could not see that paying 300k for a 1bed in Dublin city centre in 2006 was foolish, there is no stopping that herd mentality.

techdiver

antoinolachtnai wrote: »

The best thing the government can do for people in negative equity is to help increase the value of their homes again, by ensuring that there are excellent, inexpensive public services available to these homes. In particular there needs to be very good public transport.

I agree with the need for good public services as this will benefit all, but they shouldn't be utilised to artificially prop up house prices. If you make and investment and it goes bad you just have to live with it.

The_Conductor

techdiver wrote: »

I agree with the need for good public services as this will benefit all, but they shouldn't be utilised to artificially prop up house prices. If you make and investment and it goes bad you just have to live with it.

He did say 'value' rather than 'price' in all fairness. The value a property has is far more than its headline price......

techdiver

smccarrick wrote: »

He did say 'value' rather than 'price' in all fairness. The value a property has is far more than its headline price......

Sorry, that's correct.

I was just making the point that public services such as transportation should be a given and not just a means of starting another possible stampede of the herd.:D

amtc

Why do people assume that everyone in negative equity bought at inflated prices in 2006/7?

I bought my place with 20% deposit in 2003 and borrowed only 200k, which is twice my annual income.

I am now about 70k in negative equity and lose my mortgage interest relief. OK, I earn good money but getting hit hard with the levies AND a fixed rate mortgage (fixed in 2005 when interest rates were rising every month).

I feel like I'm being hit every way. I acted responsibly - college, saved, lived at home until I could buy, and then told BOI that no, I didn't want five times my income, just twice.

ionapaul

mathie may be right in this respect; we could see a situation where instead of 'irrational exuberance', the masses plumb the depths of despair and turn their back on property as an investment vehicle and see it as a terrible investment, no matter what the fundamentals indicate! Prices could overshoot on the way down as well, allowing for true bargains to be had. I am not convinced this will happen, but it may be time to buy when every single person is advising you against it (we are no-where near this point yet!), all newspaper articles are negative and the VIs are not given any time by the media anymore.

The Government need to realise (FF will never do this - vote the economic traitors out!) that we need lower property prices in this country and don't attempt to prop them up using our and future generations' taxes.

the_dark_side

no jobs, no buyers....slump in house prices, negative equity

no jobs, no tenants... over supply of rental houses

no mortgage repayments, reposession by the bank.

no jobs, no money to repay bank x 100,000 borrowers

no jobs, no buyers to buy reposessed houses from bank

stalemate

combine this with no tax revenue for governmnet to pay public sector workers

national bankrupcy

correct/incorrect?

faceman

astrofool wrote: »

The problem with negative equity is that it prevents mobility, people can't sell up, as they owe more than the property is worth, and can't get a new mortgage due to having to take 100%+ equity in the new place (even if they were just swapping houses of the same value).

The only thing I could see happen is that the government make it easier for people who are already in negative equity to move, perhaps by guaranteeing the outstanding amount with the bank (basically an unsecured loan) during the moving process, allowing mobility.

Otherwise, if you did want to trade up, even if you're in negative equity, now would be a good time, as the difference in house prices is now smaller, requiring a smaller loan to move up. Of course the opposite is true if you want to trade down, meaning we could see a lot of people staying in large houses, when they'd prefer a small cottage or bungalow.

The government proposed doing something with Stamp Duty to help in this area. As far as I recall from the budget, the proposal was you dont have to pay stamp duty until after you sell your original home +"x" months or something. Although personally I cant see it helping things moving!

bobbiw wrote: »

Typical Irish mentality that they should be bailed out of everything.

What do you mean Irish mentality? Do you speak on behalf of the nation?

The_Conductor

amtc wrote: »

Why do people assume that everyone in negative equity bought at inflated prices in 2006/7?

I bought my place with 20% deposit in 2003 and borrowed only 200k, which is twice my annual income.

I am now about 70k in negative equity and lose my mortgage interest relief. OK, I earn good money but getting hit hard with the levies AND a fixed rate mortgage (fixed in 2005 when interest rates were rising every month).

I feel like I'm being hit every way. I acted responsibly - college, saved, lived at home until I could buy, and then told BOI that no, I didn't want five times my income, just twice.

I'm not in negative equity- however the bank has revalued my home for 'mortgage purposes' (to establish the current LTV ratio as a means of my getting a better interest spread). The current value is EUR16k less than I paid for the property in 2001. Admittedly it was overpriced when I bought it- but the location is great. Ps- I'm with BOI too....