Fitch - very gloomy outlook .

Delancey

Just 2 predictions - 20% of Irish mortgages will default , property prices will decline 60% from their peak.

These predicitions represent a significant deterioration from last year when they forecast 15% of mortgages would default and prices would drop 50% from their peak.

A gloomy outlook overall suggesting low growth and confidence.

The 20% mortgage default prediction seems particularly pessimistic - any reason to think this may be overstated ?

http://www.irishtimes.com/newspaper/finance/2012/0802/1224321295760.html

NIMAN

Some properties already at 60% drop.

Wouldn't be surprised to see the 20% figure come to pass as well.

Dannyboy83

I'd say it's about right, going on where we are now and what it would take to get there.

When you consider Stamp duty won't be scrapped even when property taxes come fully online...

I have enough saved in my mortgage deposit account now to go buy a house tomorrow morning, after some serious ball busting in the savings department and frugal living.

But prices need to fall again from where they are, in order for me to be able to afford
-the removal of Mortgage Interest Relief,
-1% Stamp Duty,
-Property Taxes,
-Water Taxes
-Irish banks increasing interest rates... (Irish banks are stress testing their mortgages really hard at the moment, because their short term plan for profit is to turn up the interest rate heat.)

The above would, conservatively, add up to 2 extra mortgage repayments per year.

So I would say Fitch are being quite realistic in this case.

Sand

Its difficult to see grounds for overstating it tbh. About 15% of the Irish workforce is unemployed. Sending our educated and motivated abroad to work in other economies is apparently a sign of our own thriving economy (Yeah, I don't get it either). Growth is within the margin of statistical error, and there's no reasons to presume growth is going to increase in the near future. Political risks remain high with Germany seemingly determined to drag the rest of the Eurozone screaming over the cliff.

Ireland still hasnt solved any of the underlying problems from 2007-2008, and its clear from the ill-disguised but misjudged glee of the supposed June "deal for Ireland" and the recent adventure into the bond markets that Insider Ireland has no intention of confronting those underlying problems. They still think they're *this* close to getting away with it.

Under these conditions, its unlikely Ireland is going to beat conventional wisdom and go through a huge property crash without massive property price losses and mortgage defaults. NAMA or no NAMA.

ardmacha

These rating agencies have lost a lot of their credibility.
In this case a large change from last year doesn't seem warranted, as circumstances in Ireland have not deteriorated in that time and interest rates remain low. The general European outlook has hazards to be sure as the Germans appear to determined to play chicken.

Sponge Bob

Delancey wrote: »

The 20% mortgage default prediction seems particularly pessimistic - any reason to think this may be overstated ?

None, Fitch are probably on the low side.

20% defaulting is not equal to 20% written off. It is but an observation that 20% of mortgages will find themselves 90 days in arrears at some stage ( and at the same time). I reckon more like 33% will.

The main ratings agencies should all be locked up by 2010 and doing long sentences for their role in the sub prime affair though.