Ireland, where repaying your mortgage is optional

Joe Hart

No, believe it or not, even if one bought during the anomoly of the bubble, if you got a tracker rate, you would still be better off than someone who never bought (except you'd be stuck due to negative equity, but economically you would be better off).

That's impressive that you know the ecb interest rate for the next 60 years.

cookie1977

Joe Hart wrote: »

That's impressive that you know the ecb interest rate for the next 60 years.

I think you know what he meant.

Phoebas

murphaph wrote: »

42% of Germans are homeowners. This trend is increasing. Most Germans aspire to home ownership but realise it won't happen as they won't get finance due to more conservative lending criteria than in Ireland during the crazy years.

That's really very low.

StillWaters

Joe Hart wrote: »

That's impressive that you know the ecb interest rate for the next 60 years.

Why would I need to know the ECB rate for the next 60 years? Firstly, there would only be 15 or so years left on the mortgage, secondly rents rise with inflation, inflation rises with interest rates.

Nino Brown

StillWaters wrote: »

Why would I need to know the ECB rate for the next 60 years? Firstly, there would only be 15 or so years left on the mortgage, secondly rents rise with inflation, inflation rises with interest rates.

I'm not sure that's necessarily true, I would imagine supply and demand has a much greater impact on rent than inflation.

StillWaters

Nino Brown wrote: »

I'm not sure that's necessarily true, I would imagine supply and demand has a much greater impact on rent than inflation.

Even with your hypothises, What happens if interest rates rise - supply contracts.

Joe Hart

StillWaters wrote: »

Why would I need to know the ECB rate for the next 60 years? Firstly, there would only be 15 or so years left on the mortgage, secondly rents rise with inflation, inflation rises with interest rates.

Inflation does not rise with interest rates, it does the exact opposite. You've revealed your lack of financial knowledge to all.

makeorbrake

Anynama141 wrote: »

If you can't, but you can pay - say - two thirds of the mortgage, then there should be some solution workable whereby the government or the bank takes a stake in your property, so that the taxpayer gets some value for money too.

That makes so much sense for all stakeholders in what is a far from ideal scenario. I can't see why they have not been more proactive in pursuing this option. The borrower receives % of the property proportional to what they pay. The bank take their stake which they (years from now..) will eventually realise. Furthermore, these properties are fully utilised (and looked after) without any need to disturb the current occupants - and are not dumped onto the market (as there will be enough properties already on the market following repossession - those that are beyond saving).

Victor

Chop Chop wrote: »

WOW!!

Sorry a few posts after, Pure fiction you wrote there, where did you get the utter bollocks statistics from?

N need for this.

Moderator

StillWaters

Joe Hart wrote: »

Inflation does not rise with interest rates, it does the exact opposite. You've revealed your lack of financial knowledge to all.

That's almost as big a boo boo as thinking mortgages are 70 years long.

StillWaters

makeorbrake wrote: »

That makes so much sense for all stakeholders in what is a far from ideal scenario. I can't see why they have not been more proactive in pursuing this option. The borrower receives % of the property proportional to what they pay. The bank take their stake which they (years from now..) will eventually realise. Furthermore, these properties are fully utilised (and looked after) without any need to disturb the current occupants - and are not dumped onto the market (as there will be enough properties already on the market following repossession - those that are beyond saving).

Debt for equity is an option on the table. I think it is an excellent solution in some circumstances.

makeorbrake

StillWaters wrote: »

Debt for equity is an option on the table. I think it is an excellent solution in some circumstances.

Since I first heard tell of it, I've always thought it was making the best out of a less than ideal situation. However, you say it's on the table - is this being proposed by the banks currently? Are there any stats out there on how many such deals have been struck?

Nino Brown

StillWaters wrote: »

That's almost as big a boo boo as thinking mortgages are 70 years long.

Economists should read this thread, so Stillwater can tell them how they're all wrong. Especially Ben Bernanke!

Joe Hart

StillWaters wrote: »

That's almost as big a boo boo as thinking mortgages are 70 years long.

Where did I ever say that? You've zero credibility if you think inflation is linked with higher interest rates. I think I will just ignore you from now on as there is nothing to be gained.

MMAGirl

Nino Brown wrote: »

Economists should read this thread, so Stillwater can tell them how they're all wrong. Especially Ben Bernanke!

Newsflash. Every Irish person on the Internet is an economist.
Its going to be our biggest export.

Nino Brown

MMAGirl wrote: »

Newsflash. Every Irish person on the Internet is an economist.
Its going to be our biggest export.

Haha, yeah, we're world famous for managing economies at this stage, unfortunately it's for all the wrong reasons.

Villa05

username123 wrote: »

im not sure where you are getting the myth that people who cant pay their mortgage can pay rent - with what money

Unemployment amongst those in arrears is at 7% therfore there is only a very small portion of people that will need housing support from the state

Anynama141

Villa05 wrote: »

Unemployment amongst those in arrears is at 7% therfore there is only a very small portion of people that will need housing support from the state

It's funny how we are told on one hand that defaulters have no money to rent, and so can't be repossessed, and on the other hand we are told that of the defaulters can pay most of the mortgage, so they can't be repossessed.

Those two things can't be true at the same time.

Anynama141

MMAGirl wrote: »

Newsflash. Every Irish person on the Internet is an economist.
Its going to be our biggest export.

Unfortunately, most people can't tell the difference between a bluffer or misguided fool talking nonsense and someone who actually understands what they are talking about. Some of us have been following this stuff for years - I can PM you a link to a post on another forum where I pointed out in 2006 that we were in a bubble and that it would collapse as soon as the credit taps were turned off.

I'm still not sure how repossessions are supposed to hurt the economy though - they might hurt some people's pride and their pockets, but taxing money from folks to fund debt sharing isn't going to increase public spending either, is it?

Villa05

username123 wrote: »

Repossessions do work - but not in a very depressed housing market with a massive mortgage arrears problem. There is no sense in a bank repossessing an asset worth much much less than the outstanding mortgage. They can survive some amount of write down - but the problem in Ireland is too big. In Iceland they revalued the mortgages because they faced a similar problem.

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We have a massive arrears problem because there are no repossesions.

Iceland revalued because they did not bail out there banks, so had more scope to help those in arrears

Nino Brown

Anynama141 wrote: »

I'm still not sure how repossessions are supposed to hurt the economy though - they might hurt some people's pride and their pockets, but taxing money from folks to fund debt sharing isn't going to increase public spending either, is it?

Even if it does hurt the economy, and my taxes end up getting spent on social housing for displaced families I can live with that. What I cant live with is paying for somebody to live in their big house they can't afford, while I rent my 2 bed apartment.

Anynama141

StillWaters wrote: »

I bought my first house over 20 years ago, so am mortgage free now. I cam pack up and head off too, safe in the security that I have somewhere to come back to.

That's great, but for every you, there's a guy who bought in the last ten years and he's goosed. He's the guy you need to persuade that renting is a bad idea, not us!

Villa05

StillWaters wrote: »

The maths has been done many times on this forum, calculated over ones lifetime, buying is cheaper than renting.

Ffs Of course it is, when paying is optional

Villa05

StillWaters wrote: »

You're right. It's a lifestyle choice, but it's also forward planning.
If interest rates go up, inflation goes up, rents go up.

Have interest rates doubled over the past 3 years?
How much have rents gone up by?

Does not matter I suppose because house prices always increase

makeorbrake

Villa05 wrote: »

Have interest rates doubled over the past 3 years?
How much have rents gone up by?

Does not matter I suppose because house prices always increase

StillWaters is mistaken in his/her thinking re. rising interest rates/inflation/rising rents. However, the point about lifestyle choice/forward planning in relation to deciding between renting or buying stands.
Rent vs. buy is not black and white - there are +'s n' -'s to be weighed up in relation to each option.

StillWaters

Anynama141 wrote: »

That's great, but for every you, there's a guy who bought in the last ten years and he's goosed. He's the guy you need to persuade that renting is a bad idea, not us!

No there isnt. Most homes here have noi mortgage attached. And most people who bought in the last 10 years are meeting their mortgage repayments. There is noone here arguing that strategic defaulters or people who have no hope of ever catching up on their mortgage should be protected from repisession. What is at issue is people who can currently only partpay, either interest only, or less than interest only. I would argue that that is possibly a temporary crisis in their lives, loss of one wage, childcare issue etc, and a temporary solution is required, eg extension of term, capitalisation, debt for equity etc, not the permanent solution of reposession. This serves noones interests.

Anynama141

StillWaters wrote: »

No there isnt. Most homes here have noi mortgage attached. And most people who bought in the last 10 years are meeting their mortgage repayments.

Um....source? You are probably right - but I wonder how big the majority is?

StillWaters wrote: »

There is noone here arguing that strategic defaulters or people who have no hope of ever catching up on their mortgage should be protected from repisession. What is at issue is people who can currently only partpay, either interest only, or less than interest only.

I think there are plenty of people trying to argue that, but I accept that more intelligent commentators are not.

StillWaters wrote: »

I would argue that that is possibly a temporary crisis in their lives, loss of one wage, childcare issue etc, and a temporary solution is required, eg extension of term, capitalisation, debt for equity etc, not the permanent solution of repossession. This serves noones interests.

The problem with this is that many people have already had 2 years to sort themselves out. At a certain point, what starts as 'temporary' becomes the norm. You are considered long-term unemployed if you haven't worked for a year. I think 2 years forbearance should be the limit - if you can't pay at least the interest at that point, then you need to go down one of the other routes including repossession.

On the extension of term limits, I presume you a aware of how little difference even years worth of extensions are in lowering the monthly payments?

For a repayment mortgage of 200k, assuming 5% interest:
30 year mortgage: 1084.19
35 year mortgage: 1017.86
40 year mortgage: 971.30

As you can see, adding 5 years of nearly 1k per month payments (effectively adding 60k or so of extra mortgage payments) knocks a feeble €45 per month off your mortgage bill. And it gets worse as you raise interest rates and lengthen the terms. The difference between a 45 and 60 year mortgage might buy you a sandwich every few days.

It's also worth pointing out that some people aren't great at maths or working things out for themselves and may not realise that - in their desperation to keep their current property - they are effectively going to be working for the bank for the rest of their lives. Sometimes the smart thing to do will be to negotiate a deal to hand back the property, pay back some of the debt hangover over a few years, and start from scratch in a house that costs half as much. Assuming they still want all the headaches as well as advantages that go with home ownership, of course.

In addition, an interest-only mortgage means that you are effectively renting the property from the bank anyway, only with none of the flexibility of actually renting - you can't up and leave for work or if you need more/less room etc.

Solair

Ireland's also a land where declaring bankruptcy results in a long, long, painful drawn out process that until recently lasted 12 years.

In most other countries, you'd be declared bankrupt, your house would be repossessed the debts would be written down, your credit rating would be completely screwed for years, but you'd move on and things would get resolved eventually.

The Irish approach seems to be to attempt to sweep the problem under the carpet and hope it will resolve itself.

Anynama141

By the way, for those who argued that moral hazard was not a problem and that the banks had already been capitalised enough to allow a debt and mortgage write-off bonanza, according to the Sunday Business Post the IMF has told the government that the banks may need another €16,000,000,000 of capital.

Who do you think is going to be asked to stump that up?

makeorbrake

Anynama141 wrote: »

Who do you think is going to be asked to stump that up?

Who said anything about asking? Cyprus set the general standard....so we know where those funds will be raised.