Negative Equity Doesn't Really Affect Us...We're Not Moving!

“Negative Equity Really Doesn’t Affect Us…We’re Not Moving!”

:angry: If I had a euro for every time I’ve heard one of my family, friends, colleagues or neighbours come out with this crap I would have enough for at least a couple of thousand Irish Bank Shares.

What they really are saying is " If I lose my job, want a divorce, want to move job, want to move house or get sick my arse is hanging out the window"

Some truly are deluded.

In fairness that outlook is preferable to the “I’m in negative equity so I want a bailout even though I’m still employed and can still pay my mortgage” brigade.

Funny you should say that. I suspect quite a few people are simultaneously playing both tunes. Cognitive dissonance much?

I assume they bought their house for cash more than 15 years ago, are non-taxpaying, social welfare recipients who have no need to use a bank for any service.

Otherwise, they will be paying higher interest rates, higher taxes, bank service charges and getting wage cuts.

As long as they continue to receive their Social Welfare they may manage to avoid the incoming property tax - but they may find the state’s ability to continue the largesse to it’s pensioners and it’s unemployed may be curtailed in the future.

Negative Equity - especially other peoples - is a bitch!

Sorry, I should have added that those I referred to are in either negative equity or have seen massive losses of any cash they have put into the property leaving them with nothing.


Are some people making the point tho, that now that no one can actually get a mortgage, those who borrowed back in the day and got a decent house in a nice neighbourhood which they can afford for now, kind of have one up on the homeless renting people who actually will probably find it hard to get a place in the foreseeable future as all their money goes on rent/living?! This is obviously delusional and insane, maybe it’s a result of the anti depressants a lot of these people have resorted to at this point.

Wages are being cut and will prices cut enough to match our nouveau poor’s affordability levels? There are a lot of Nouveau Poor Irish families.

Will our savings disappear if we get our own currency and we end up with an Irish currency maybe like the old Italian Lira in value? Will this make it harder to get oneself into a secure position for those sitting on the fence waiting to buy a home.

Sometime it’s hard to see an upside to the whole country collapsing around us financially, whether you are caught in the neg eq trap or sitting on the fence. Maybe that’s kind of their point.

What a nightmare tho to be trapped in some house that you’ve outgrown or no longer want or whatever and it’s stuck to you like the ball and chain, entrenched in a collapsed bank. At least if you’re not moving cos you’re happy where you are you’re ahead of that posse

I think savers will always be savers and even with a new currency will be able to save. Those who complain about not being able to get a mortgage most likely have a tiny deposit. 25% should be a bare minimum in the current market, in fact I think it’s completely inadequate.

Is it important for negative equity households that they are overpaying for their housing utility versus their wealthier ‘neighbours’? If your mortgage repayment is twice that of your neighbour then your neighbour has more money to spend on the other significant portion of their lives outside of housing.

It has ever been thus. It used to be that the person who bought later was paying more than the person who had bought an identical house earlier. Now it is the person who bought earlier who is paying more. That aspect in itself should not be a cause for wider concern.

You’re probably right, but a quick back-of-an-envelope calculation:

Purchase Price: €250,000
25% deposit: €62,500
Mortgage: €187,500
Monthly payment, at 5% over 25 yrs: €1,100

So, let’s suppose you can afford to pay the rent (or live at home with the folks), AND save for your deposit at the same rate you will eventually be spending on your mortgage. It’ll take nearly five years of hard graft.

That on its own means a lot less customers for mortgages than when they were handing out 100% to anything on two legs.

Comparing someone starting with a 25% deposit to someone starting with zero is not really valid in my opinion. You need to compare two people starting at zero, one saving and one borrowing 100%.

A simplified version of this would be:
Monthly repayment of 5% mortgage over 25 years on 250,000.
1461.48 (17537.76 p.a.)
Compared with equivalent monthly savings of above less 520 (2.5% of property value for rent):
940.65 (11287.80 p.a.)
Let’s assume our renter is accruing 5% per annum on his/her savings/investments:
After 15.5 years they would have accumulated 100% of the purchase price.
After 5 years they would have accumulated 25%.
The price will usually have changed in the intervening period.
Compare this with the mortgagee who will take almost ten years (116 months) to accumulate 25% equity in their home.

But let’s face it – offered a choice between having the house now or in five years time, even at the cost of pissing five years of the mortgage down the drain, what do you think most people will choose? Lots of people I know borrowed more than five years worth of their mortgage in “top-ups” for fluff.

In fact, let’s really face it, even now the majority of people haven’t the first clue how to work out what any of this is costing them, and will take whatever the bank will give them.

Let’s not confuse prudent behaviour with herd behaviour. The preference for current consumption over future consumption is what keeps the great unwashed masses poor. Just because there is a culture of being wrong does not make it right.

way to go lumping everyone in NE in to a simple generalisation.

I’m in NE to the tune of about 25k, but to be classified a DSE38r as ‘great unwashed’ and that I am going to be ‘kept poor’ is a total nonsense.

I have more than enough savings to sell while in NE and am in the process of doing that, myself and the wife have a joints salary of close to 160k per annum.

We bought a very modest house in 2005 when we could have been even stupider and bought a trophy house. The difference between what I would have paid between rent and ‘house purchase’ is fairily minimal …its not the end of the world but I am by no means poor or destined to a life on the breadline.

quality of life isn’t about money above a certain line …

I apologise if my post caused offence, but it was not my intention to characterise those in negative equity as the great unwashed. I was referring to the separate if perhaps related phenomenon of a preference for current consumption over future consumption.

FYI, my posts on this thread to date have mostly been in response to a sub-theme introduced by Scrambler of affordability post bubble. Except this one… viewtopic.php?p=502367#p502367

I can kind of see your point, but there were two types of inflation previously i.e. normal inflation and bubble inflation. The runaway nature of bubble inflation induced fear in the ‘outsiders’ during the bubble that they would end up overpaying for their housing vis-a-vis their mortgagee contemporaries. The current deflation should surely be the converse of that bubble inflation. This is distinct from normal inflation which is a fact of life and shouldn’t really be a source of alarm.

I made reference to this years ago as the little ‘white lie’.

Are you by any chance choosing assumptions to give you the answer you want???

  1. you completely ignore mortgage interest relief
  2. A 2.5% rental yield - really? Would 5%-6% not be more realistic? That would more than double the rent figure you show and more than halve the savings.
  3. 5% net return on savings? A bit optimisitic for the ordinary Joe Soap?
  4. You mention that prices may have changed but ignore the impact it could have i.e. if prices just track inflation of 2%-2.5% p.a. then after 15 years that 100% you came up with is more like 70%

I don’t think my assumptions are particularly unrealistic. I never said it was an exhaustive model. If you’d prefer to revise it according to your own assumptions then feel free.

…I’m not sure they’re deluded, more perhaps that they are trying to find a crumb of comfort in the financial mess that they know full well they are in. I’m most people in this situation are pretty aware that they’ve overpaid for their homes and they are financially overstretched, but there’s not much they can do about it now. No point in worrying that there might be a job loss or divorce down the road, does that help their situation?
Seriously, would it be better if they they were suicidally depressed, ready to put a gun in their mouths and pull the trigger?