Mortgages after an economic collapse

Drexl Spivey

Suppose there is an economic collapse. And let's say most people lose their jobs and inflation sky rockets.

What would happen to all us folks with mortgages? (off the hook or in deep sh**?)

I understand it all depends of the magnitude of the collapse but I'm interested to know what you guys think.

Khannie

I'd say the best thing to do is check what happened in Germany post WW2, or more recently in Argentina maybe.

Danpad

I've pondered over this exact situation quite a bit. So, let's say we keep on getting taxed/levied etc, not to mention the automatic deduction of the household charge etc and hundreds of thousands more people can't afford to keep their mortgage. These people then require the help of the state in terms of housing, rent relief etc etc. It's a vicious circle isn't it? What are TPTB going to do? Continue with their draconian austerity measures and evict us all? What then?

We have a couple of friends-he was working, lost his job and signed up for welfare. They couldn't afford the mortgage so they handed the keys into the bank, packed up and left the house. They're now renting in an area they really like, on welfare and getting rent relief from the govt.

So the equation went like this: Working and paying for everything themselves. Govt/bankers wreck things. Lose job, lose house-now govt pays for everything. In the Chinese sense of the phrase-we're living in very interesting times.

touts

This came up in the media a couple of years ago when there was regular talk of leaving the Euro and returning to the punt. Argentina is a good example of the social chaos that would occur but here there is the added complexity that we could leave the Euro currency and devalue the punt but the Euro would continue to exist and may even strengthen without us dragging it down.

There were lots of different throries but one that stuck in the mind was a discussion on one of the Sunday shows that put the fear of god into me. The feeling on that show was your savings (if you have any) and wages would convert to punts but your debts would depend on the contracts. If the Euro continued to exist and the ECB continued to set rates and you had a mortgage contract that referenced them then it is possible that the bank could leave your debt in Euros. That would mean if there was a 50% devaluation of the punt then your debt suddenly doubles and the power of your wages to pay it back halves. It all comes down to the wording of the contracts and as the banks have found out with the trackers the contracts are very hard to get out of if the wording unexpectedly backfires on you. Argentina really only had one currency to worry about so everything went down together.

It was one of the Sam Smyth shows but no idea what the date was so I can't link to it. I think Constantine G was one of the panel.

Now if you are talking about a complete economic worldwide collapse where the EU breaks up and the Euro ceases to exist. Well in a case like that your mortgage will be the least of your worries. It is most likely that the bank you had it with will have ceased to exist their assets (such as your debt) might have been sold on but if it is a bad collapse there may not be any willing buyers so it could just disappear. But in such a scenario supply chains would break down and public services like the police would not turn up for work so you would be too interested in trying to find basic supplies for your family and then fighting off looters to protect what little you have. The mortgage would be a low priority.

Drexl Spivey

touts wrote: »

The feeling on that show was your savings (if you have any) and wages would convert to punts but your debts would depend on the contracts. If the Euro continued to exist and the ECB continued to set rates and you had a mortgage contract that referenced them then it is possible that the bank could leave your debt in Euros. That would mean if there was a 50% devaluation of the punt then your debt suddenly doubles and the power of your wages to pay it back halves.

Yes exactly: so noone would ever be able to repay
typical mortgages now are 30-40 years. If you double the outstanding balance and calculates the interests based on the new balance then it is virtually impossible to repay in a life time.
I don't want to work until I'm 85 to repay my mortgage!

touts wrote: »

Now if you are talking about a complete economic worldwide collapse where the EU breaks up and the Euro ceases to exist. Well in a case like that your mortgage will be the least of your worries. It is most likely that the bank you had it with will have ceased to exist their assets (such as your debt) might have been sold on but if it is a bad collapse there may not be any willing buyers so it could just disappear. But in such a scenario supply chains would break down and public services like the police would not turn up for work so you would be too interested in trying to find basic supplies for your family and then fighting off looters to protect what little you have. The mortgage would be a low priority.

Agreed.