A person purchased a property at the peak of the boom in 2007 for €500k. They got a tracker mortgage of ECB + 60 bps, and a 100% mortgage. They were entitled to MIR. If they are on a 30 year term, their monthly repayments are now circa €1,690 (excluding MIR). The total payments on their mortgage will be circa €608k (again, excluding MIR).
Today, I could probably purchase that property for 300k. Assuming I get a 100% mortgage (I know this isn’t possible), on a 30 year term with a rate of 4.75%, my monthly repayments would be circa €1,565, with a total repayment of circa €563k.
So my monthly (and total) repayments are circa 7% lower (actually less if you allow for MIR). And if anything, the spread between the ECB rate and variable rate mortgages will probably increase in the near-term, meaning my monthly repayments will increase relative to person on tracker. So unless you are a cash buyer, property prices haven’t really fallen that much at all!
(Obviously, stamp duty in 2007 was higher)
What are peoples thoughts – other factors that need to be considered?
*I’m getting my numbers from here:
The person purchasing, with a tracker, for €500k in 2007, when ECB rates were around 4.00% would have had repayments of approx. €2,531 per month. Those repayments have dropped to approx. €1,690 and become more affordable due to ECB rates tumbling.
If you had bought with an SVR for €500k in 2007, your repayments would also have been in the region of €2,500 (depends on bank). Buying today with an SVR for €300k your repayments are €1,565.
Your relative position isn’t that different as you can’t benefit from the tracker rate but that doesn’t change the fact that affordability has improved significantly for both of you (for the 2007 buyer because of falling interest rates and for you because of falling prices)
Absolutely - maybe the subject of the topic is a bit misrepresentative of my point! It is still frustrating that my monthly (and total) costs are not all that different from somebody who bought during the boom…
Don’t say I didn’t warn you
I was speaking to Philip Sherry of Sherry Fitzgerald on Sunday at a dinner party and he was of the opinion that prices would rise by 10% this year and 10% next year. However he also said if you were thinking about selling that you would be better off holding out for another year. I would thought he would be encouraging potential sellers to advertise with them. Then again a slow drip feed is what the EAs want.
In order to be polite and not get into any argument I did not challenge him on either point.
Prices would have to rise 13% from now until end of Dec for this to happen.
If everybody who plays the lotto, happen to all pick the same numbers and those numbers come up… what would the pay out be?