Housing Bubble Bursting

warrenaldo

but also drops will happen due to the ECB raising rates. each time they raise rates it means you can also borrow less.

eirmail

warrenaldo wrote:

but also drops will happen due to the ECB raising rates. each time they raise rates it means you can also borrow less.

Also each time they raise, the more interest your deposit gets in a savings account. that is if you have a deposit.

Deposit accounts could hit 5 percent by the end of the year.

Some people compare this to general inflation , I would only compare it to house price inflation.

nesf

eirmail wrote:

Some people compare this to general inflation , I would only compare it to house price inflation.

Why, as a matter of interest (pardon the pun..)?

Zambia

nesf wrote:

Why, as a matter of interest (pardon the pun..)?

If the Money is being stored for a future house purchase well then even if Interest rates go up in general your still doing well.

House price inflation is negative and your getting more of your house for the money you have saved and need to borrow less.

Well thats my stab at it...;)

nesf

Zambia232 wrote:

If the Money is being stored for a future house purchase well then even if Interest rates go up in general your still doing well.

House price inflation is negative and your getting more of your house for the money you have saved and need to borrow less.

Well thats my stab at it...;)

Yeah but surely people storing money for a future house purchase are in the minority? I read it as a general point rather than one specifically aimed at house buyers (I could be wrong here).

eirmail

nesf wrote:

Yeah but surely people storing money for a future house purchase are in the minority? I read it as a general point rather than one specifically aimed at house buyers (I could be wrong here).

Not necessarily , a lot of SSIAs are maturing . Many couples might be getting together the bones of 40K between them as a deposit for a house. This is only a ten percent deposit for a 400K house , but if that 400K is down to 320K next year and there 40K is up to 42 K , they have a 13 percent deposit.

Zambia

nesf wrote:

Yeah but surely people storing money for a future house purchase are in the minority? I read it as a general point rather than one specifically aimed at house buyers (I could be wrong here).

Well if its not for Buying a house well then you should consider standard inflation IMO.

nesf

eirmail wrote:

Not necessarily , a lot of SSIAs are maturing . Many couples might be getting together the bones of 40K between them as a deposit for a house. This is only a ten percent deposit for a 400K house , but if that 400K is down to 320K next year and there 40K is up to 42 K , they have a 13 percent deposit.

Hmmm, I can see where you are coming from though not that many SSIAs were for the full amount and quite a few have matured already. For people in that position then as you say house price inflation not standard inflation is what is most meaningful to them versus interest rates.

Gurgle

Do-more wrote:

I admire your optimism if nothing else!

Meh, its not really optimism.

The prices can go up 300% or drop by 70% without affecting my housing plans for the next 10 years.

Do-more

Anyone else hear the e-mail read out on the Ray D'Arcy Show this morning? It was from a poor unfortunate couple who bought a €370,000 house on a 100% Mortgage with a monthly income of €3500 between them! In their estate of 28 houses, 14 of them are for sale! They have the house for sale for ages and have had no interest whatsoever. Seems like desperation was really setting in with interest rates rising and rising. It's the likes of these people who are the human side of the madness that has gone on in this country with lenders chucking money at people and a property market which has been skewed by speculators with prices which bear no relationship to fundamental values.

aphex™

Do-more wrote:

100% Mortgage with a monthly income of €3500 between them!

You'd swear the evil bank put a gun to their heads to force them to take out that mortgage reading what you've just posted.

Sure, it's everybody else's fault, not. Personal responsibility anyone? Where's 'de govnment' when you need it, eh?

Still, the irony is stories like that freak out buyers and help reduce prices even more, so keep them coming!

Do-more

Of course they have their own personal responsibility in this, but if there were strickly enforced rules about the multiples of income people are allowed to borrow (as it was when I first purchased in 1990) then people could not get into this situation.

Still, the irony is stories like that freak out buyers and help reduce prices even more, so keep them coming!

As the old saying goes "Be careful what you wish for!"

Gurgle

Do-more wrote:

Anyone else hear the e-mail read out on the Ray D'Arcy Show this morning? It was from a poor unfortunate couple who bought a €370,000 house on a 100% Mortgage with a monthly income of €3500 between them! In their estate of 28 houses, 14 of them are for sale! They have the house for sale for ages and have had no interest whatsoever. Seems like desperation was really setting in with interest rates rising and rising. It's the likes of these people who are the human side of the madness that has gone on in this country with lenders chucking money at people and a property market which has been skewed by speculators with prices which bear no relationship to fundamental values.

First question I would ask is why they're trying to sell the house so soon.

If they jumped on the last trailer behind the bandwagon, and were just trying to make some easy money then sympathy runs down a bit.

HashSlinging

earning 3500, how did they get a 370k mortgage, twisted earnings I'd say.

Zambia

HashSlinging wrote:

earning 3500, how did they get a 370k mortgage, twisted earnings I'd say.

Yeah this stinks a bit yet accordingto this

http://www.mortgages.ie/monthly_repayments_calculate.cfm

It seems there repayments will be around 1700 - 1800 over 35 years.

Not good but they could ride it out

tHE vAGGABOND

earning 3500, how did they get a 370k mortgage, twisted earnings I'd say

TO be honest I dont believe them..

Even the worst sub-prime lender [let alone the high street banks] would not give them a mortgage of 55%/60% of their monthly income tbh, even if they had a huge deposit and a guarantor.

Sounds to me like a radio producer telling a ‘worst case scenario’ story to generate news and interest, ie: sh1t stirring

seamus

They could easily have used a guarantor to get a mortgage for that amount.

daveirl

This post has been deleted.

robd

I they could have just gotten it when ECB interest rates were considerably lower. 2% instead of 3.75%. I think that is a simpler explanation. With a discount they could have been paying 2.5% fixed for the first year or 2.

Zambia

Interest rates would have had to be at an all time low

And they would have had to fudge their income by about 100%

And get a guarantor.

It reminds me of assemling your own gun from a book a of matchs so you can shoot yourself.

Duckjob

Common sense went out the window a long time ago where the Irish Property market is concerned.

So many people have wilfully ignored the real limits of their repayment abilities and decided to beg, borrow or steal just to hop aboard the 'gravy train' that was the property market.

Now the tracks are starting to come apart, it's hard to feel sympathy for them.

iguana

Gurgle wrote:

First question I would ask is why they're trying to sell the house so soon.

My first guess would be that they bought before the interest rates rose and now they can't afford the repayments.

It was an email on a radio show - could have been just made up!

ixoy

Well when I made tentative enquiries at the EBS, the girl there started seeing how much of a mortgage we could have gotten (we didn't ask!) and she reckoned that they could give us 100k more than what we wanted (with guarantor checks) even though it'd really have streched us, not withstanding looming interest rate changes.

We're level headed enough to not have been interested, but if the society was look it up of their own violition, then it's not a stretch to see how people get into such situations if they're pushing themselves.

HashSlinging

question about going guarantor, if I was to go guarantor on my daughters house (my house being paid for) and she fell behind in payments whats the worst thing that can happen.

seamus

The guarantor is the last person they will chase.

Basically, if the guaranteed person defaults on their payments, the bank will follow all of the usual routes - try to work out a repayment schedule, then go about selling the house. Then if there is still money outstanding on the mortgage (i.e. the house sale didn't cover the mortgage amount), they will come after the guarantor, who of course may arrange some kind of payment process with them.

PIMPHO

Bought a 3 bed apartment plus car park space for €497,500 in Mellowes Quay (At Mellowes bridge, development beside Statoil as you are going towards Heuston). Should I be worried about negative equity? I'm going to be living in it and renting out the 2 other rooms and was intending to sell it in 3-5 years time.

Any opinions would be appreciated.

Cheers

conor_mc

What size is your mortgage?

seamus

You may not see any kind of return on investment if you sell in 3-5 years' time, but a large apartment that close to the city centre should easily maintain its value. I'd advise holding onto it for ten years, even if that means moving out and fully renting it in five years' time.

Zambia

PIMPHO wrote:

Bought a 3 bed apartment plus car park space for €497,500 in Mellowes Quay (At Mellowes bridge, development beside Statoil as you are going towards Heuston). Should I be worried about negative equity? I'm going to be living in it and renting out the 2 other rooms and was intending to sell it in 3-5 years time.

Any opinions would be appreciated.

Cheers

Normally proximity to the city centre gives you some protection. However thats not set in stone.

IMO if its a 100% mortgage well you may experience a small amount of NE it should pass in 3 years

Best of Luck