Yes, but I’d like to turn it on its head and see what the effects of a debt cramdown with equity stakes being taken in return for negative equity would do. And to see some of the likely losses that will happen on the residential book.
I jumped to the conclusions. Anything important missing from them?
10% of neg equity households defaulting? I wonder if that means 14,000 irish households could end up defaulting
You’re just not listening YM… To quote David’s conclusion:
The ironing is delicious… The research is taken without any pinch of salt or rigorous critique and clearly shows it’s just another woodchip on the leg of the stool that is NAMA.
It makes you sick, I wish I worked in the ESRI so I could shred this Duffy guy…
I’m not understanding your objection here TUG. Are you supporting a bailout for a mortgage holders?
It’s a little rich to quote a figure part way through a housing bust as if it is the final figure. It is also a bit cracked to use a figure from the US where most mortgages are non-recourse.
I have always supported debt forgiveness for the ordinary householder.
And chasing down the developers for every last red cent.
Take note Kate P!
It takes two to tango. I don’t see how letting off the “ordinary householder” and chasing down developers is any better than letting off the “ordinary developer” and chasing down homeowners.
Do people with multiple properties qualify for TUG’s giveaway? Do renters get a discount on the rent they paid?
I suppose you support NAMA then!
Seriously, we’ve had this discussion before… Obviously, it wouldn’t be a blanket amnesty and certainly would only be based around genuine PPRs, rather then say loans of 5 million or up, or the top 50 developers…
Anyway, it all puts further burden on recovery, so I don’t really care…
Hasta la victoria siempre!
At the very beginning:
This drives me spare.
Normal market: €100K mortgage+€50K interest over 20 years gives repayments @ €7.5K a year and defaults @ 1% pa
Bubble market: €500K mortgage+€400K interest over 30 years gives repayments @ €30K a year and defaults @ 5% pa
Negative Equity is the amortization of the misappropriation of capital.
It is an issue and it does matter.
I assume they mean to the individual.
NE is really only an issue if you find yourself needing to move. Obviously you end up paying back a lot than you should have had to but you know that already when you sign up for the mortgage.
The property bubble basically destroyed the “rental premium” since you could move around as easily by buying and selling as you could via renting. This became fairly evident when people started buying completely inappropriate properties in completely inappropriate areas. For those folks NE will be a pretty big deal because their “starter home” will be theirs for 35 years.
And indeed young Duffy agreed with you back in June, fast forward to October and now in many cases, it won’t be an issue.
Oh lord, the ladder…
I mean the individual too!
Say I have a pre-bubble mortgage of €100K. Between the jigs and the reels I repay €7.5K pa. I get a bubble mortgage of €500K and repay €30K pa. I’m now €22.5K pa poorer. Nothing to do with depreciating assets or any of that shite. Seeing NE as an issue of asset price depreciation is missing the wood for the trees.
The asset was priced over, say, 30 years - so the change in current market price - up or down - is immaterial to you if you wish to stay in the property. What matters is your repayments and it’s opportunity cost.
And indeed, back in June this chap (I wanted to use an expletive!) agreed!
Most people won’t perform that sort of calculation, arguably if they were that savvy they wouldn’t be in that mess in the first place.
The most likely way it’ll become obvious to them is when friends/family buy their own lower priced place and they compare mortgage repayments. They’ll probably still rationalise away the difference though “Oh mine came with a free hamper” or whatever.
Nobody seems to have the stomach to regulate the industry though. I find it incredible we can pass any number of laws on the flimsiest of pretexts but the idea of doing away with 35 year year mortgages doesn’t even register with anyone.
This is an economist though - and that’s what drives me spare!
I can forgive other people not doing the mental gymnastics to understand the amortization issue - but these guys are supposed.
I can’t tell you the number of times I’ve seen this go unchallenged by economists in the last six months!
In fairness, he alludes to it…
MEWing! Your home should be an ATM!
I saw that - but the phrase “feel less wealthy” is another hot button!
They are less wealthy! And society at large has been affected by the misallocation of capital into asset speculation.
I could go on - but it was fucking dire, simple-minded regurgitation of accepted wisdom that got us into this mess and it looks like we have to rely on it to get us out of it too!
As for “equity release” - aaaaarrrggghhh!!! - call it what it is debt release.
But the money is just bursting to get out!
This and the Fitzgerald demand paper a few weeks back are the ESRI trying to establish LTEV with some intellectual rigour.
Fitzgerald did housing demand without calculating the causes of excess immigration mid decade…ie they came to build or to replace those who had left factories to build and are now unemployed.
Duffy did lending demand without calculating the causes of excess slovenly lending which shall not be repeated.
Both show no more empties or negative equity by 2014 , in effect . Hah !!
Fitzgerald and Duffy do not want the ESRI to go in a Lenihan bonfire of the quangos and are trumpeting their masters voice and providing ‘independent’ analysis of this LTEV nonsense . Am I surprised ??