Will the Governnment do anything about negative equity

mathie

A friend of mine thinks the Government will do something for people in negative equity.

Anyone think they will?
If so what will they do?

Do what exactly?

mathie

Deleted User wrote: »

Do what exactly?

I've no idea.
Hence the question.

Small Change

mathie wrote: »

If so what will they do?

Deleted User wrote: »

Do what exactly?

mathie wrote: »

I've no idea.
Hence the question.

I'm confused

Paulw

Of course they won't do anything. What can they do????

It's a fact of life - cost of things can go up or down.

Hopefully they will not do anything. I can't think of anything that could be done that wouldn't be at the expense of taxpayers in general and those of us who didn't borrow too much and pay too much.

What does your friend think they will do?

damnyanks

Anyone know what the bankruptcy law in Ireland is like ? Can people just declare bankruptcy and walk away from the houses?

mathie

Small Change wrote: »

I'm confused

Threads.
Confusing.

mathie

Deleted User wrote: »

Hopefully they will not do anything. I can't think of anything that could be done that wouldn't be at the expense of taxpayers in general and those of us who didn't borrow too much and pay too much.

What does your friend think they will do?

I think something along the lines of allowing them to sell their place (which is in negative equity) at current market value and the government will cover the shortfall.

blah

What can the government do? Anything they do will cost the taxpayer money.

If they give everyone high rates of mortgage relief, then that's less tax revenue.
If they force the banks to give everyone low interest rates, the banks make less of a profit and need more bailout money.

They'll just end up giving with one hand and taking with the other.

Except in the case of people who, for whatever reason, have not bought yet.

John_Mc

damnyanks wrote: »

Anyone know what the bankruptcy law in Ireland is like ? Can people just declare bankruptcy and walk away from the houses?

No. The Bank will sell your house for whatever they can get and then pursue you for the outstanding balance.

blah

mathie wrote: »

I think something along the lines of allowing them to sell their place (which is in negative equity) at current market value and the government will cover the shortfall.

But the government is the taxpayer....?

spockety

I think the government should pay off the negative equity amount outstanding on a mortgage in a one off amnesty.

In order to pay for it I should think a new "NE Tax" would be brought in, perhaps a 10% levy on everything. Income, goods, travel, services. Should pay for it within a few years.

irlrobins

mathie wrote: »

I think something along the lines of allowing them to sell their place (which is in negative equity) at current market value and the government will cover the shortfall.

Dream on! Anyone who suggests that as a course of action has no grasp of basic economics.

hobochris

spockety wrote: »

I think the government should pay off the negative equity amount outstanding on a mortgage in a one off amnesty.

In order to pay for it I should think a new "NE Tax" would be brought in, perhaps a 10% levy on everything. Income, goods, travel, services. Should pay for it within a few years.

I think that's worst thing they could do.

Your essentially waving peoples debts and putting them onto the shoulders of people who were smart enough not to rack up debt in what was obviously a bubble. it would be quick way to spark a surge in Emigration.

Why Should I pay for someone elses debt? did I benefit from them borrowing beyond their means?

also it would rock investor confidence as the government could just wipe out debt as they see fit, so why should investors invest in this country when their investments could be devalued at any stage.

we're trying to attract outside investment in order to build a knowledge based economy not drive it away.

spockety

spockety wrote: »

I think the government should pay off the negative equity amount outstanding on a mortgage in a one off amnesty.

In order to pay for it I should think a new "NE Tax" would be brought in, perhaps a 10% levy on everything. Income, goods, travel, services. Should pay for it within a few years.

I would leave the country if that was enacted.

Why should I bailout my landlord who has been loosing about €500 per month on his "investment" since he bought it a couple of years ago.

techdiver

spockety wrote: »

I think the government should pay off the negative equity amount outstanding on a mortgage in a one off amnesty.

In order to pay for it I should think a new "NE Tax" would be brought in, perhaps a 10% levy on everything. Income, goods, travel, services. Should pay for it within a few years.

Of course. I will pay for some one else who was dumb enough to borrow too much.... dream on.....

hobochris

To answer the thread title question: my guess would be no.

They did nothing to prevent it, in fact they nurtured an environment for the unregulated madness that caused this boom-to-bust to happen.

What we should be asking now is what was in it for them?

there is no point going into to much here, I'll use my vote to voice my opinion.

The_Conductor

spockety wrote: »

I think the government should pay off the negative equity amount outstanding on a mortgage in a one off amnesty.

How is this an 'amnesty'? It would in effect be the government stepping in and handing out lumpsums to random people. Further- negative equity is notional until such time as a property is sold. You, me and the man on the moon may know that a property is not worth the amount outstanding on a mortgage- but its purely hypothetical until such time as the property is sold......

spockety wrote: »

In order to pay for it I should think a new "NE Tax" would be brought in, perhaps a 10% levy on everything. Income, goods, travel, services. Should pay for it within a few years.

We already have a tax on everything- its called VAT. The rate of VAT varies on different products and services, and varies depending on the frame of mind the Minister for Finance is in.

Also- why should someone who exercised prudence and decided they would be overstretching themselves were they to buy into overpriced property- be punished- by having to bailout their idiot neighbour who splurged like there was no tomorrow? Its all well and good to say 'life's not fair'- but putting a punitive tax on someone who exercised due caution and diligence is not the way to go.

If there is to be an effort made to assist people- it has to be by reform of personal bankruptcy law- its the only fair way of dealing with this......

Cookie_Monster

Why should they? Those people (who bought over priced property) have already proved they are not good with money/finances. How could anyone possibly think that giving them more would be a good idea?


No one forced any of these people to buy a house, it was a risk they themselves took and unfortunitly they got stung.

The government have much more important things to worry about.

Senna

They have had already done something. They have kept TRS for 7 years after the purchase of a property.
It would have been very easy (and beneficial) for them just to cut all relief and they would have done it, only for so many people in NE.

It would be another nail in the coffin of the property market, so there is another reason, but NE was the biggest reason for keeping it (for the moment, it will be completely phased out soon enough).

There is another dark cloud on the horizon for those in NE, property tax will soon be introduced and for many it will be the straw that broke the camels back. Imagine OAP's medical card X 100.

smccarrick

smccarrick wrote: »

If there is to be an effort made to assist people- it has to be by reform of personal bankruptcy law- its the only fair way of dealing with this......

I guess this is it. You live with your negative equity (and ask the banks to let it follow you if you move home?) or you don't get credit for the foreseeable future.

whippet

I bought a car for €40K two years ago, will the government give me 20 odd grand to make up that short fall ? Class, maybe that LCD I bought pre-HD, I could get a grand back on that .... savage !!!! ... recession .. what recession !!!

More and more we are hearing people looking for 'The Government' to help out such and such ... do people not realise everytime 'The Government' spends a cent they are taking money out of everyone else's pockets!! it's our money !!!

spockety

My post was obviously way too sarcastic for the sarcasm to be spotted, sorry folks!

(Or the fact that nobody spotted it means that they are actually fearful that this type of thing is something our government would actually consider :eek: )

irlrobins

No I picked up on the dripping sarcasm. But it was fun to watch people fly off the handle....:D

whizzbang

spockety wrote: »

My post was obviously way too sarcastic for the sarcasm to be spotted, sorry folks!

(Or the fact that nobody spotted it means that they are actually fearful that this type of thing is something our government would actually consider :eek: )

There is so much lunacy going about at the moment that your slipped in without being noticed

I'm sure somebody somewhere thinks your suggestion is a fair idea.

nice1franko

also, the government should cover losing bets on the grand national as its not fair on joe public.

...the mind boggles

I've been drinking

Firetrap

I certainly hope not. It's like betting on a horse then going back to the bookie to complain that the horse lost. I for one refused to buy a house because I believed we were experiencing a housing bubble that was going to burst. Now that I have been proved right, why should I bail out people who are in negative equity?

RATM

Yeah I'd agree with Sprockety on this one. There should be a blanket 10-15% negative equity tax. We should slap it on the 40m people in the US who claim Irish ancestry. We did build their country after all, including the Grand Canyon. About time they started paying us something back imo.

CamperMan

I hope not

Photojoe

If the govt does one little thing for all these mongs in NE then that is it. I'm going straight on the dole, scamming it every which way I can. No way am I paying for these cretins who put as much thought into a 500K purchase as they did their overpriced lunch in Eddie Rockets.

thebman

If they do I'm acting as recklessly as possible in the next upturn since I'll be rescued by the government.

Acted responsibly this time, if I'm going to get screwed for it then I'm going to take advantage next time.

Can people begin to see why this is such a crap idea? Its nobodies fault but the mortgage holder that the took out such large mortgages and the property values fell. The banks may have been silly to give them out but those people still accepted them and must now face the consequences.

I don't wish it on anyone but I'm not that nice that I want to bail out a bunch of people who mostly earn more than me a year.

Keith C

meh if someone was stupid enough to pay €300k for 1 bed shoebox or €450k for 2 bed shoebox, I doubt they're worried bout negative equity, sure the value of property can only go up, this is only a temporay blip.

eth0_

mathie wrote: »

A friend of mine thinks the Government will do something for people in negative equity.

No. Why should they? Why should Irish taxpayers bail out idiots who grossly over-borrowed on houses worth 6-10 times their income?

The banks should be penalised for ever offering these mortgages but at the end of the day they didn't force anyone to over-stretch themselves on their mortgage repayments.

thebman

I think a much more realistic outcome would be for the government to request that the banks that have been bailed out, offer mortgage holders the ability to change from fixed to variable rate mortgages with reduced penalties if possible.

There are potential problems with that too but I understand the difficulties people are having and the banks shouldn't be able to just act like they weren't lending recklessly. However, it can't be at teh expense of lending to businesses to create employment and if the banks are spending their time and money reducing pain on mortgage holders then we can't expect them to have the time to work with business which isn't acceptable.

Senna

thebman wrote: »

I think a much more realistic outcome would be for the government to request that the banks that have been bailed out, offer mortgage holders the ability to change from fixed to variable rate mortgages with reduced penalties if possible.

Negative Equity and Fixed rate mortgages have nothing to do with each other and it should not be assumed that by bailing out one you are helping the other.
What they do have in common is that both were entered into willingly and both will come to an end at some point in the future. Nobody held a gun to anyone's head, if you made the decision you should live with it.

Jo King

The government is going to do something about negative equity.

Make a lot more of it!

hobochris

eth0_ wrote: »

The banks should be penalised for ever offering these mortgages but at the end of the day they didn't force anyone to over-stretch themselves on their mortgage repayments.

Why? They are business after all. as a general rule businesses try to earn the maximum profit they can.

This is the governments failing not the banks for not putting legislation in place to regulate lending(i.e. put something in place so you can borrow no more the 5 times your yearly income).

But they let it spiral out of control.If they had done something at the start of the boom the idiots who borrowed more then they could afford would not be in their mess.

The government is meant to act in peoples best interests, in this case they didn't, as it was in peoples interest (especially those who borrowed like there was no tomorrow) to have their credit restricted to what they could afford.

Jo King wrote: »

The government is going to do something about negative equity.

Make a lot more of it!

+1

For once the government doing nothing is the right thing... let the market bottom out to realistic prices.

astrofool

The problem with negative equity is that it prevents mobility, people can't sell up, as they owe more than the property is worth, and can't get a new mortgage due to having to take 100%+ equity in the new place (even if they were just swapping houses of the same value).

The only thing I could see happen is that the government make it easier for people who are already in negative equity to move, perhaps by guaranteeing the outstanding amount with the bank (basically an unsecured loan) during the moving process, allowing mobility.

Otherwise, if you did want to trade up, even if you're in negative equity, now would be a good time, as the difference in house prices is now smaller, requiring a smaller loan to move up. Of course the opposite is true if you want to trade down, meaning we could see a lot of people staying in large houses, when they'd prefer a small cottage or bungalow.

BC

Speaking as someone who is in negative equity i'd have to say no. While i'm annoyed with myself, I do realise that it was all my own doing and don't expect to be bailed out by anyone. There seems to be an assumption that everyone in negative equity is crippled with a mortgage. That is not the case. There are plenty of people like me who are perfectly able to pay the mortgage because it wasn't a crazy sum of money but still paid too much and ended up in NE.

I would also be annoyed if the government bailed out fixed term mortgage holders.

PullOutMethod

Negative equity per se is not the problem - particularly where they can afford the repayments.

The problem is people who bought unsuitable properties because that was all they could afford during the bubble.
I know countless young couples who are now living in apartments, some of them well out in commuter counties.
They want to start families but cannot because there is no room - their property is totally wrong.
They can't move because they are in NE. They cannot even switch lender. They are stuck paying off this debt for 30 and in some cases 40 years.

That is the real tragedy and legacy of Bertie Ahern.
If you were born in the 1970's your life has probably been harmed by this property bubble.

Jaysoose

BC wrote: »

Speaking as someone who is in negative equity i'd have to say no. While i'm annoyed with myself, I do realise that it was all my own doing and don't expect to be bailed out by anyone. There seems to be an assumption that everyone in negative equity is crippled with a mortgage. That is not the case. There are plenty of people like me who are perfectly able to pay the mortgage because it wasn't a crazy sum of money but still paid too much and ended up in NE.

I would also be annoyed if the government bailed out fixed term mortgage holders.

Gotta agree with the above, im in NE aswell but can easily pay my mortage and am not looking for anybody to bail me out as i signed the contract, it has turned out to be the wrong move but there is nothing i can do about it so have to take it on the chin.

Im surprised at the generalisation on this thread 'idiots' 'mongs' etc etc...one person asked the question but people are talking as if everybody in NE is crying their eyes out.

The real idiots in all this are people that took car loans, houses, multiple credit cards and thought that the banks would keep giving them money forever.

I personally dont think the goverment should take over NE as this would further detach people from their own personal responsibilities of their actions.

techdiver

PullOutMethod wrote: »

Negative equity per se is not the problem - particularly where they can afford the repayments.

The problem is people who bought unsuitable properties because that was all they could afford during the bubble.
I know countless young couples who are now living in apartments, some of them well out in commuter counties.
They want to start families but cannot because there is no room - their property is totally wrong.
They can't move because they are in NE. They cannot even switch lender. They are stuck paying off this debt for 30 and in some cases 40 years.

That is the real tragedy and legacy of Bertie Ahern.
If you were born in the 1970's your life has probably been harmed by this property bubble.

If they couldn't afford a more appropriate property they should not have entered the market. This notion of getting your foot on the property ladder has been proven to be a load of crap now that we've seen what has ensued.

I couldn't afford an appropriate property during the boom times with my girlfriend, so we rented and are still renting, happy in the knowledge that some one is subsidising us to live exactly where we want. We can move every year if we see fit and are not tied down.

The problem with Ireland is that there is still this "foot on the property ladder", mindset out there, despite the harsh realities of what has happened and what continues to happen. My opinion is don't buy a place to live unless you plan to live there indefinitely (allowing for changes in circumstance of course).

Duckjob

The chances for a negative equity digout for Joe Soap are between slim and none. The government is clearly saving its bailout euros for their developer mates.

In fact, what with them directing NAMA not to push the big developers to the wall, coupled with more pressure on the banks to open up FTB mortgage credit, it looks like their plan is to transfer the NAMA debt out onto the broad shoulders of a new wave of gullible FTBs.

Electric Sheep

techdiver wrote: »

The problem with Ireland is that there is still this "foot on the property ladder", mindset out there, despite the harsh realities of what has happened and what continues to happen. My opinion is don't buy a place to live unless you plan to live there indefinitely (allowing for changes in circumstance of course).

Yep, so many still think they are going to make their golden fortune from the property ladder and "trading up". It's like they have their hands over their ears going "lalala" because they refuse to believe that there's an easy buck to be made from houses.

thebman

Yeah the same people who are afraid to invest in the stock market or did and thought anything with .com could only go up I imagine.

A lot of people seem to refuse to believe that what goes up will probably come down eventually and may not go back up to the same level it once was.

The_Conductor

Yep- the term is 'irrational exuberance'. Unfortunately its part of the human condition- look back in history- you can bet even the cavemen had their own twist on it. The Dutch tulip mess, brought the theory of mass exuberance into popular culture- but a knowledge of whats happening doesn't seem to infer an ability on people to resist the temptation to join the masses in their quest for untold riches........ The global economy has imparted the ability for another theory- that of the butterfly effect- to be examined in detail. Causal events in one corner of the world can have a devastating effect elsewhere...... In Ireland- we didn't need the causal events of elsewhere for everything to go tits up- we through own ineptitude, provided the perfect scenario all by ourselves......

bobbiw

Typical Irish mentality that they should be bailed out of everything.

They shouldnt.

They didnt turn around and tax people 90% on any increase in the value of their home so why should they turn around and do anything about a fall in value.

i think the goverment is doing way too much as it is.

mathie

techdiver wrote: »

If they couldn't afford a more appropriate property they should not have entered the market. This notion of getting your foot on the property ladder has been proven to be a load of crap now that we've seen what has ensued.
I couldn't afford an appropriate property during the boom times with my girlfriend, so we rented and are still renting, happy in the knowledge that some one is subsidising us to live exactly where we want. We can move every year if we see fit and are not tied down.

The problem with Ireland is that there is still this "foot on the property ladder", mindset out there, despite the harsh realities of what has happened and what continues to happen. My opinion is don't buy a place to live unless you plan to live there indefinitely (allowing for changes in circumstance of course).

Hindsight. 20-20.

You know I've been on boards a long time.
I saw the masses telling people to get on the property ladder and now I see the masses saying don't buy.
The herd behaviour is interesting to say the least.

Isn't there some theory out there that suggests to do the opposite to populist thinking?
Like when everyone is full on sure that Man Utd will beat Barcelona as they've 3 of their regular defenders missing then it's a good idea to bet the other way.

Now I'm not saying we're at the bottom I'm just saying the hysteria we saw at the top will be all to scarily familiar at the bottom.

techdiver

mathie wrote: »

Hindsight. 20-20.

For some people maybe. It was obvious to some that this was essentially a pyramid scheme and like all such schemes was doomed to collapse. I do agree about the herd mentality, it's a funny human trait. When one person sees his neighbour doing something, he automatically will try to replicate it.

The problem is that we will not learn from this unfortunately. We will be back here in 20 - 30 years time talking about the same thing again and of course when that time comes people will proclaim - "Ah yea, but this is different!"