David Mc William (2 year Mortgage Break)

Dempo1

David MC Williams, one of the most sensible Irish Economists is recommending a two year payment freeze for Mortgage Holders, his rational is this will help stimulate the economy through consumers having more spending power. Unfortunately he does not offer an explanation n what happens when the two years are up. Personally i am all for his proposal, about time Mortgage holders got some relief after the Banks being bailed out.

My Question, what are contributors thoughts on this radical proposal.

sophia25

Do you disagree with David Mc Williams Proposal

It is definitely one of his better ideas. This is one way of trying to stretch the austerity proposal as ESRI suggested while still complying with our promises. This extra money released back into the market could kickstart economy. We need to spend to save jobs, as well as budgetary cuts.

dotsman

Sounds good at first, but how exactly would we pay for all this?

2 years of no interest payments would see people returning to much larger mortgages in 2 years time (2 years of roll-up interest added to the amount outstanding), thus costing people more in the long run.

You must remember that we are in a period of very low interest rates. However, rates will rise in a few years time (possibly just in time for people to be coming off their 2-year break. Thus, not only would customers repayments be increased to cover the interest roll-up, but they would also be paying at higher rates, so the monthly premium would be a lot large than it is right now. That could come as a massive slap in the face to people and the "consumer confidence", most likely leading to another recession.

Also, what would happen to people on fixed rate mortgages?

Another problem would be monitoring loan quality. If nobody is paying their mortgages, how do we know they are not paying them because they can't afford them, or because they are spending the money on clothes/drink/holidays etc.

Finally, would people be happy to see even more money pumped into the banks to increase their capital to survive the 2 years (as they would have far less income coming into them during the 2 years).

Finally, I would disagree with the description "one of the most sensible Irish Economists" being used to describe David McWilliams. I've read his books, watched his documentaries, read many articles by him etc. He does have some interesting ideas and is right on some points, but wrong on others. I find that he takes an opinion and only looks at the evidence that supports that opinion without really examining the full picture and ignores any evidence that might show that opinion to be risky or even plain wrong. Ultimately "a sensationalist/tabloid economist" would be a better description.

Why, might I ask, are you describing him as "one of the most sensible Irish Economists"?

homer911

Do you think Mortgage Holders should be offered some relief/ particularly those in negativity equity

In 1993 when the Punt was under pressure I was paying 14% on my mortgage - I dont recall getting any special assistance then.

Mortgage holders are grown-ups - they have to take responsibility for their actions - nobody forced them to buy a house at a crazy price

professore

Do you think Mortgage Holders should be offered some relief/ particularly those in negativity equity

On the OP's question, firstly I assume that interest would be frozen as well, otherwise what's the point ?

Even so I wouldn't be in favour of it, as it would mean the banks would need even more money, and the kind of people who are in trouble with their mortgages now are either unemployed in which case they can't spend anything, or up to their eyeballs in all sorts of debt, in which case they will be paying down that.

dotsman wrote: »

Why, might I ask, are you describing him as "one of the most sensible Irish Economists"?

On balance I think the OP is correct about this. Whilst he does use some sensationalist prose, most of his predictions to date have been spot-on, while that of other so-called expert economists have been dead wrong every time.

Remember the "soft landing" ??? There has NEVER been a soft landing to a bubble in history. What about the so called "affordability" of homes ? I could go on.

Must say I think he's wrong about leaving the euro though - if we were never in it in the first place that's a different matter but now that we're in, and all our debts are in euro, if we left the country would be truly shagged, unless we accompanied it with a default on ALL debts (public and private) and went back to growing potatoes.

I am waiting to see his stance on the reduction of the deficit to 3% by 2014. I think that's impossible and will wreck the country. BTW I am not PS, I am self-employed, but I have kids in school and my family and I occasionally need healthcare, both of which will fall apart if this slash and burn is allowed in such a short space of time. Much as I hate to admit it, I agree with the beards on this one.

Dempo1

Do you disagree with David Mc Williams Proposal

dotsman wrote: »

Sounds good at first, but how exactly would we pay for all this?

Very good points all round, i too wondered what would happen after the to year period. I describe Mc Williams as "One of the most sensible economists" primarily because throughout this mess, he has managed to get predictions correct generally (although not always) and does appear to have a grasp on reality as opposed to the Guff expressed by other high profile economists who's commentary has and continues not to be entirely objective.

Dempo1

Do you disagree with David Mc Williams Proposal

homer911 wrote: »

In 1993 when the Punt was under pressure I was paying 14% on my mortgage - I dont recall getting any special assistance then.

Mortgage holders are grown-ups - they have to take responsibility for their actions - nobody forced them to buy a house at a crazy price

Agreed but we are where we are and something is going to give, if some of the predictions are correct regarding negative equity and Mortgage arrears we are in for a brutal shock in 2011.

Sandwlch

If banks do not have an influx of 2 years worth of mortgage payments, does this not further reduce their capacity to loosen up lending to wealth creating investment. Stiffling any economic enterprise and growth that are required for a recovery?

Dempo1

Do you disagree with David Mc Williams Proposal

Sandwlch wrote: »

If banks do not have an influx of 2 years worth of mortgage payments, does this not further reduce their capacity to loosen up lending to wealth creating investment. Stiffling any economic enterprise and growth that are required for a recovery?

I guess the question is, with all the bail outs why are the banks not lending now, credit is near impossible to get whether is be personal or business.

Blackjack

Do you think Mortgage Holders should be offered some relief/ particularly those in negativity equity

I don't have a mortgage - where's my bailout?.

chris85

Do you think Mortgage Holders should be offered some relief/ particularly those in negativity equity

Ok so lets strip the bank of its income from mortgages for two years. Then we expect them to lend more and more and we dont want anymore capital input from the taxpayer. its a situation which wont happen and for obvious reasons.

How about a stimulus package such as Australias one where everyone was given $800 at one stage just to do what they want with with the intention to spend in the economy.

I also think a great idea would be insulation of homes and spend big on grants on it. This would get some of the builders which are forming the majority of people on the dole back into action to work, as well as helping homeowners to save money on energy bills. This will also help reduce carbon emmissions and be better towards Koyoto agreement,

Dempo1

Do you disagree with David Mc Williams Proposal

Blackjack wrote: »

I don't have a mortgage - where's my bailout?.

The Thread is specifically addressing the question of Mortgages but i do accept there are many other Loans / Commitments hard to service in the current climate, especially those who lost their Jobs. To be honest i would be relieved not to have a Mortgage in the current situation. Those with negativity equity mortgages are in a very dark place with no light at the end of the tunnel, OK, there are those who will say people made choices but those choices were made in a market exaggerated by greed, high profit margins and on the back of development tax breaks. The people i most feel sorry for are those who bought into septic tanks, otherwise known as Ghost estates. These people are not just in a dark place, its a sewer. People with mortgages are tied to secure debt, most of which is worth less than originally borrowed.

Dempo1

Do you disagree with David Mc Williams Proposal

chris85 wrote: »

Ok so lets strip the bank of its income from mortgages for two years. Then we expect them to lend more and more and we dont want anymore capital input from the taxpayer. its a situation which wont happen and for obvious reasons.

How about a stimulus package such as Australia's one where everyone was given $800 at one stage just to do what they want with with the intention to spend in the economy.

I also think a great idea would be insulation of homes and spend big on grants on it. This would get some of the builders which are forming the majority of people on the dole back into action to work, as well as helping homeowners to save money on energy bills. This will also help reduce carbon emmissions and be better towards Koyoto agreement,

The concept of Insulating homes via grants is and has been in place for quite some time, problem is the grants whilst generous cover a small percentage of the cost, the paper work is a nightmare and most of the Mortgage holders in deep trouble likely own new houses not requiring insulation. I actually availed of a small grant and had a good conversation with the approved company who informed me this line of work as been there specialty for years and they hired no additional staff, in fact they let some go. The concept was a brilliant idea but the way it was implemented and currently managed is a disaster.

As for the few free dollars, again a nice idea but our Government is Broke and i suspect €800 might help the retail sector over one christmas from the average family.

Blackjack

Do you think Mortgage Holders should be offered some relief/ particularly those in negativity equity

Dempo1 wrote: »

The Thread is specifically addressing the question of Mortgages but i do accept there are many other Loans / Commitments hard to service in the current climate, especially those who lost their Jobs. To be honest i would be relieved not to have a Mortgage in the current situation. Those with negativity equity mortgages are in a very dark place with no light at the end of the tunnel, OK, there are those who will say people made choices but those choices were made in a market exaggerated by greed, high profit margins and on the back of development tax breaks. The people i most feel sorry for are those who bought into septic tanks, otherwise known as Ghost estates. These people are not just in a dark place, its a sewer. People with mortgages are tied to secure debt, most of which is worth less than originally borrowed.

Is someone going to pay my rent for 2 years?. I pay tax too....

unclebill98

Good topic.

I for one think its a daft idea. It would not really solve any issues long term. If you can afford to pay your mortgage then you should. Interest rates as mentioned are at an all time low. So I'll say this, if your in a position to pay extra a month then you should. It would benefit you in the longer term. After 2 years your payments will go up. Those in the worse situations have mortgage themselves till retirement so would not avail of another 2 years. Plus the extra cost of interest and life cover. So a short term gain for more long term pain!

As for banks lending, yes they are. Stricter controls alright but people are still trying to obtain houses/things they can not afford and then moan about not getting the loan. The mortgage market in banks is dead. They want the business but are not really bother about not getting it.

As for those inn neg eq. Its a tough one. Do we reduce the amount owed to correct the mortgage? This would be near impossible to do without angering many people who don't benefit. Banks are being more flexible when it comes to people in arrears but those who wont pay and those who cant pay are very hard to separate.

stepbar

Do you think Mortgage Holders should be offered some relief/ particularly those in negativity equity

Have to laugh at the mindnumbing nonsence McWilliams is coming out with. Mortgage holders already get relief which should not be sneezed at. And in fact some can make a tax free income by renting a room.

If someone cannot repay, giving them 2 years will make SFA difference. Just wait until interest rates start creeping up. And trust me the EU won't be thinking about little old Ireland when they start to rise again. Although there's no immediate talk about interest rate rises but you can be sure it will happpen way before 2013. The best thing the Government could do now is allow an individual to declare bankruptcy and come out the other end within a fair timeframe (certainly less than 12 years at present).

Dempo1

Do you disagree with David Mc Williams Proposal

stepbar wrote: »

Have to laugh at the mindnumbing nonsence McWilliams is coming out with. Mortgage holders already get relief which should not be sneezed at. And in fact some can make a tax free income by renting a room.

If someone cannot repay, giving them 2 years will make SFA difference. Just wait until interest rates start creeping up. And trust me the EU won't be thinking about little old Ireland when they start to rise again. Although there's no immediate talk about interest rate rises but you can be sure it will happpen way before 2013. The best thing the Government could do now is allow an individual to declare bankruptcy and come out the other end within a fair timeframe (certainly less than 12 years at present).

Not a bad point re Bankruptcy but i suspect the government will avoid changes to the law on this probably because they know there would be an avalanche of claimants probably ending up with a doubling of the amount of vacant properties on the market

As regards mortgage holders already getting relief this is not entirely true. (EXPAND IF YOU WILL) and as for renting a room tax free this is a near impossible option for those with families, living in rural locations and especially those caught up in Ghost estates (i would invite anyone who disagrees to go and visit this estates), i visited on recently and it was appalling. Three houses occupied out of 56, open sewers,exposed electrical cabling, unfinished paths, driveways and unfinished houses now being plundered by thugs.

I don't agree fully with Mc Williams proposals but there are some merits to it.

Dempo1

Do you disagree with David Mc Williams Proposal

unclebill98 wrote: »

Good topic.

I for one think its a daft idea. It would not really solve any issues long term. If you can afford to pay your mortgage then you should. Interest rates as mentioned are at an all time low. So I'll say this, if your in a position to pay extra a month then you should. It would benefit you in the longer term. After 2 years your payments will go up. Those in the worse situations have mortgage themselves till retirement so would not avail of another 2 years. Plus the extra cost of interest and life cover. So a short term gain for more long term pain!

As for banks lending, yes they are. Stricter controls alright but people are still trying to obtain houses/things they can not afford and then moan about not getting the loan. The mortgage market in banks is dead. They want the business but are not really bother about not getting it.

As for those inn neg eq. Its a tough one. Do we reduce the amount owed to correct the mortgage? This would be near impossible to do without angering many people who don't benefit. Banks are being more flexible when it comes to people in arrears but those who wont pay and those who cant pay are very hard to separate.

Its hard to disagree with your excellent points, I suppose the crux of the problem is finding solutions, something the government seems incapable of doing. I don't agree banks are lending in fact its near impossible to even open a current account in Ireland at the moment. I do agree banks are bing more flexible regarding arrears but i wonder is this only because they have been forced too? I like many people are just wondering how bad is the Mortgage crisis really in Ireland and when is it going to implode, something is going to give and I suspect its not too far away, when it does it will be the icing on the cake for this horrendous recession we are in, which by all accounts is getting worse by the day, not better as some less than objective economists would have us believe.

sophia25

Do you disagree with David Mc Williams Proposal

I think the point is we know the budget is going to take a huge amount of money out of the economy which will cause a contraction and deepen recession prognosis. A mortgage is a long term loan and increasing it by 2 years, may stave off the worst effects of budget. This isn't about a concession for mortgage holders but a way of releasing money back into the economy which should benefit everyone. Can anyone think of a better way to release money into the economy? Cutbacks are all fine but if the economy constricts any further we will all suffer, mortgage holder or not!