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Negative Equity@Tracker vs Cheaper Houses@high interest

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  • 29-01-2015 9:51am
    #1
    veryangryman
    Registered Users Posts: 5,574 ✭✭✭


    Wonder why this is rarely mentioned.

    Bought my place in 2007, tracker around the 250K mark. Average interest rate (tracker + banks 1.1%) around 2% sofar.

    Said to a mate "why not buy now". He says he's looking, but any place he gets would be subject to a probable average rate of 5%. So even if its 200K, your looking at almost (if not more) of a real cost to the buyers these days. Plus when you take into account that I would have got 10 years interest relief(20-30% of the interest) and he cannot get that, it really would make one think twice before buying.

    Anyways he thinks Im in a better position. Was like "Wow you don't hear that mentioned alot about 2007 buyers". I suppose given a decent steady income its not so bad.

    Interested in opinions.


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    #2
    delahuntv
    Closed Accounts Posts: 1,532 ✭✭✭delahuntv


    yep - those on trackers and who can afford the repayments are better off in the long run on tracker and negative equity than someone buying today at 4%.

    Your tracker is currently 1.15% (ecb rate is 0.05%).

    a 200k Mortgage at 4% will cost just over €1050 a month over 25 years (very affordable) with interest cost of €116,000.
    a 250k mortage at 1.15% over 25 year will cost 960/month with just €37,000 interest cost.



    Obviously rates will change and the gap between variable & tracker will fall, but not hugely. My calculations (done quite a while ago and confirmed by askaboutmoney.com) suggest that a 1% tracker is worth about 30% of the outstanding mortage.


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