Return of mortgage interest at c. 12%+: likely?

skallywag

I think rates will most likely certainly rise at some stage within the span of our mortgages, though it's very difficult to predict the extent. It's something which I was conscious of some years back when I took my own mortgage hence I went for an offer which capped the interest at max 6% with the lower bound being 3%.

mickman

skallywag wrote: »

I think rates will most likely certainly rise at some stage within the span of our mortgages, though it's very difficult to predict the extent. It's something which I was conscious of some years back when I took my own mortgage hence I went for an offer which capped the interest at max 6% with the lower bound being 3%.

capped the interest ? i dont think that kind of product exists

skallywag

mickman wrote: »

capped the interest ? i dont think that kind of product exists

Perhaps not it Ireland? I'm living in central Europe.

hfallada

There is zero chance of mortgages getting into double digit rates. Banks fix rates with the belief they will beat inflation and charge more interest in excess of what they give depositors. In Germany, they are giving around 1% for 15 years fixed. So German banks arent expending rates to be greater than 1% for the 15 years.

The ECB are hinting the Eurozone Economy will be pretty weak for the next 5 years. Rate increases will only kill growth. So I dont think we can expect interest rate increases for a long time.

Plus the markets are so full of savings. Germans are still saving at 0.05% interest on savings. Rates are low in Germany and they still cant get Germans to borrow. Dont expect rate increases for a while.

Rates used to be so high due to inflation, due to oil shocks and constant wage increases. Economies are no longer effected so much due to oil prices. eg in 2008 oil was around $140-150 a barrel and growth was still strong. There is no longer massive wage increases in west Economies are Central banks are effective at controlling inflation eg Germany with the bundesbank and now the ECB

quadrifoglio verde

hfallada wrote: »

There is zero chance of mortgages getting into double digit rates. Banks fix rates with the belief they will beat inflation and charge more interest in excess of what they give depositors. In Germany, they are giving around 1% for 15 years fixed. So German banks arent expending rates to be greater than 1% for the 15 years.

The ECB are hinting the Eurozone Economy will be pretty weak for the next 5 years. Rate increases will only kill growth. So I dont think we can expect interest rate increases for a long time.

Plus the markets are so full of savings. Germans are still saving at 0.05% interest on savings. Rates are low in Germany and they still cant get Germans to borrow. Dont expect rate increases for a while.

Rates used to be so high due to inflation, due to oil shocks and constant wage increases. Economies are no longer effected so much due to oil prices. eg in 2008 oil was around $140-150 a barrel and growth was still strong. There is no longer massive wage increases in west Economies are Central banks are effective at controlling inflation eg Germany with the bundesbank and now the ECB

I'll throw a spanner in the works....Ireland. who in 2012 other than Michael hasenstab thought the interest rates on Irish bonds would be at their lowest rate in history three years later? Very few and I doubt he did either.

Who in 2012 thought that Dublin house prices, would increase by 25% between June 2013 and June 2014? Very few.

God knows what could happen in a month, let alone in a year,when it comes to the economy.
Predictions are just that, predictions, nothing is certain, except that low interest rates won't be here forever, because economic growth won't stay stagnant forever...we're fubarred if it does, but it won't, it never has and never will.

I'd hazard a guess that during the depths of the great depression many in America thought that they'd never see growth again.

househero

Although inflation is the Wests only way out of its debt and that means guaranteed high interest rates. Deflation is Europe's risk. Not inflation & double digit interest rates.

The problem is, people in general are not intelligent enough to see this is a much worse problem.... If you told somebody everything would be cheaper next month, they would probably be happy about it.

Europe's problem is what Japan has already gone through. 30 years of falling house prices, falling wages and a perpetual expected drop in quality of life.

Japan house prices in the 80s were higher than the next 30 years. BUT wages fell! That meant families that signed a mortgage in the 80s on 80s wages found they got paid less in the 90s abd could NEVER realistically pay it off. Their children and grandchildren were forced to take on the debt.

jmayo

househero wrote: »

...
Europe's problem is what Japan has already gone through. 30 years of falling house prices, falling wages and a perpetual expected drop in quality of life.

Japan house prices in the 80s were higher than the next 30 years. BUT wages fell! That meant families that signed a mortgage in the 80s on 80s wages found they got paid less in the 90s abd could NEVER realistically pay it off. Their children and grandchildren were forced to take on the debt.

That can't happen here.
Our government and all the vested interests, all those new organisations fighting for mortgage welchers mortgage holders simply will not allow it to happen.
Property has to increase in value to make everyone (except those actually paying for it and those trying to buy for first time) feel better.

And of course as said during the bubble Ireland is different.
I used to think that was a joke until I now see the number of mortgages in default for years, yet the mortgagors still holding the property.

The_Conductor

The big difference in an Irish context is that the government own AIB and Irish Permanent (and they still own over 15% of BOI). Any action that will impact on the share price of these entities is to be discouraged. The politicians will make all sorts of noise to placate potential voters- but until such time as they have divested themselves of shares in these entities- that is all they will make- noise........ The government need to get shot of their shareholdings in these entities and then quit meddling in the market.

gaiscioch

househero wrote: »

Europe's problem is what Japan has already gone through. 30 years of falling house prices, falling wages and a perpetual expected drop in quality of life.

Japan house prices in the 80s were higher than the next 30 years. BUT wages fell! That meant families that signed a mortgage in the 80s on 80s wages found they got paid less in the 90s abd could NEVER realistically pay it off. Their children and grandchildren were forced to take on the debt.

jmayo wrote: »

That can't happen here.
Our government and all the vested interests, all those new organisations fighting for mortgage welchers mortgage holders simply will not allow it to happen. Property has to increase in value to make everyone (except those actually paying for it and those trying to buy for first time) feel better.

And of course as said during the bubble Ireland is different.
I used to think that was a joke until I now see the number of mortgages in default for years, yet the mortgagors still holding the property.

Excellent discussion here. Thanks to all. However, just on the highlighted part. Mortgage holders seem to be having little choice; somebody close to me has just got permission to sell their Celtic Bubble house which they bought with somebody else, and the bank is giving nothing off. In fact, as the mortgage was held jointly and severally liable, the bank isn't willing to even separate the debts and thus the expected loss of €120k will tie the two people together for years to come thus impeding their abilities to get on with their lives (they now have young families, and that debt is impeding the ability of two families to start new lives. It doesn't matter in the slightest to the bank.).

If this case is indicative of what's going on, mortgage holders will just continue to take it on the chin without any respite - despite the now routine utterances from politicians about how unfair the variable rate is, etc. As the poster above put it: the state's finances depend upon the success of state-owned banks to get as much of its loans back. There is a massive conflict of interest, whereby helping people in Celtic Bubble mortgages will impose too huge a cost on the rest of society so they will have to work out their debts privately with their bank.

gaiscioch

jmayo wrote: »

I used to think that was a joke until I now see the number of mortgages in default for years, yet the mortgagors still holding the property.

I tend to agree with you that the eviction repossession process is going very slowly but that has probably much more to do with prices being so much lower than they were when the mortgage was taken out and if the property were sold even now the bank would have to write off more money.

It should also be noted that many people view it as very unfair that people are allowed stay in houses which they cannot afford while the have to work hard to pay their mortgages/rent. Repossession, for me anyway, does not generally carry some 19th century Irish connotation of battering ram and bailiff (the so-called New Land League being a very comical case in point) - although the cases of banks bullying mortgage holders should of course be highlighted.

househero

jmayo wrote: »

That can't happen here. mortgage holders simply will not allow it to happen.

And of course as said during the bubble Ireland is different.

Of course Japan did not want it to happen either. They literally tried every monetary policy to reverse it. Obenomics had some positive effects a few years ago and house prices exceeded 1980s levels just recently. All it would take here is the gov giving the banks the go ahead to rope children in to parents debt.

Macroeconomics can not be controlled by mortgage holders or a tiny little country Ireland/japan

The west (and Japan) thinks higher taxes are the solution. They squeezed us after the crash. It made things worse, obviously. Are you paying attention #Noonan

johnp001

jmayo wrote: »

That can't happen here.
Our government and all the vested interests, all those new organisations fighting for mortgage welchers mortgage holders simply will not allow it to happen.
Property has to increase in value to make everyone (except those actually paying for it and those trying to buy for first time) feel better.

And of course as said during the bubble Ireland is different.
I used to think that was a joke until I now see the number of mortgages in default for years, yet the mortgagors still holding the property.

I don't have your faith that our government is so omnipotent as to be able to stave off the aftermath of a property price bubble coupled with deflation in a way that the Japanese (the world's 3rd largest economy around that time) were not.

The current state of the Dublin property market, where supply is increasing sharply, prices have stalled and reversed and sentiment has turned negative shows that even with infinite determination to give that can one last kick down the road the government cannot postpone the inevitable second dip until after the next general election.

The Irish property market has been artificially levitated in a futile effort to save the banks' balance sheets but gravity always wins.

househero

johnp001 wrote: »

I don't have your faith that our government is so omnipotent as to be able to stave off the aftermath of a property price bubble coupled with deflation in a way that the Japanese (the world's 3rd largest economy around that time) were not.

The current state of the Dublin property market, where supply is increasing sharply, prices have stalled and reversed and sentiment has turned negative shows that even with infinite determination to give that can one last kick down the road the government cannot postpone the inevitable second dip until after the next general election.

The Irish property market has been artificially levitated in a futile effort to save the banks' balance sheets but gravity always wins.

True but prices ARE growing. We are in economic deflation. This is something people really struggle to get their heads around. A sale at £200,000 today is an increase on a £200,000 sale the same time last year! (Usually money devalues)

Every asset class has been inflated but don't think it's the Irish gov that has done it. US QE has increased stocks WAY beyond their value, id be far more worried about a correction in stocks and bonds rather than brick & motar. EU QE will continue the trend fir at least another 3 yrs.


The gov has done LOADS to kill any price rises (and succeeded)
No more mortgage relief
New Water tax
New Property tax
Stamp duty introduced for first time buyers
Reduced public sector pay
Reduced social welfare
(Ignored and unregulated) high interest rates despite record low interbank and EU lending rates
Tougher lending criteria
New deposit rules
No more 129% mortgages haha haha hahaha

Its way more expensive and harder to buy now

There is not much more they could do to murder property price rises. IMO they have gone WAY too far. Prices rose fast as they fell far too far.

gaiscioch

johnp001 wrote: »

The current state of the Dublin property market, where supply is increasing sharply, prices have stalled and reversed and sentiment has turned negative shows that even with infinite determination to give that can one last kick down the road the government cannot postpone the inevitable second dip until after the next general election.

I'm not seeing this sharp supply increase, John, although my own anecdotal experience driving around and looking at websites is that very many houses are not selling a long time after they were originally put up. Where are you getting your info regarding supply?

johnp001

gaiscioch wrote: »

I'm not seeing this sharp supply increase, John, although my own anecdotal experience driving around and looking at websites is that very many houses are not selling a long time after they were originally put up. Where are you getting your info regarding supply?

I got the supply figure from a post on another forum (this includes MyHome and Daft figures)
http://www.thepropertypin.com/viewtopic.php?p=820487#p820487

The inflow figure I got from Daft listings only.
To remove the factor of seasonal trends I made a table of new property listings on Daft in the first 6 weeks of 2015 against the same period in 2014.


And also, large increase in Dublin supply is mentioned in the last Daft sales report:

Daft Q4 2014 report wrote:

More than 3,500 properties were listed for sale in Dublin on December 1, a third more than on the same date a year previously.

See page 9 of:
http://c0.dmstatic.com/619/report/Daft-Sale-Report-Q4-2014.pdf

hfallada

johnp001 wrote: »

I got the supply figure from a post on another forum (this includes MyHome and Daft figures)
http://www.thepropertypin.com/viewtopic.php?p=820487#p820487

The inflow figure I got from Daft listings only.
To remove the factor of seasonal trends I made a table of new property listings on Daft in the first 6 weeks of 2015 against the same period in 2014.

But stats are useless if starting from a small base, which you are. 1.6K properties for Dublin is tiny considering 1.3 million people in Dublin

Mongfinder General

gaiscioch wrote: »

Excellent discussion here. Thanks to all. However, just on the highlighted part. Mortgage holders seem to be having little choice; somebody close to me has just got permission to sell their Celtic Bubble house which they bought with somebody else, and the bank is giving nothing off. In fact, as the mortgage was held jointly and severally liable, the bank isn't willing to even separate the debts and thus the expected loss of €120k will tie the two people together for years to come thus impeding their abilities to get on with their lives (they now have young families, and that debt is impeding the ability of two families to start new lives. It doesn't matter in the slightest to the bank.).

If this case is indicative of what's going on, mortgage holders will just continue to take it on the chin without any respite - despite the now routine utterances from politicians about how unfair the variable rate is, etc. As the poster above put it: the state's finances depend upon the success of state-owned banks to get as much of its loans back. There is a massive conflict of interest, whereby helping people in Celtic Bubble mortgages will impose too huge a cost on the rest of society so they will have to work out their debts privately with their bank.

All of the can't pay/won't pay borrowers who could not meet mortgage repayments are caught between a rock and a hard place. They face having to capitalise arrears or having to pay gift tax to the Revenue if a bank writes off part of the debt in order for them to stay in the game. Not pleasant.

quadrifoglio verde

Mongfinder General wrote: »

All of the can't pay/won't pay borrowers who could not meet mortgage repayments are caught between a rock and a hard place. They face having to capitalise arrears or having to pay gift tax to the Revenue if a bank writes off part of the debt in order for them to stay in the game. Not pleasant.

Sorry if a bank renegotiated a debt which leads to a writedown, revenue can charge you gift tax on it?
Do you have a link for this?

Mongfinder General

quadrifoglio verde wrote: »

Sorry if a bank renegotiated a debt which leads to a writedown, revenue can charge you gift tax on it?
Do you have a link for this?

I don't have precise information right now for you. It will be Tuesday before I see the tax guy at work. I discussed this with him last week.

Here is some basic information. www.knowyourtax.ie/tax-consultancy/gift-inheritance-tax/formation.

househero

Mongfinder General wrote: »

I don't have precise information right now for you. It will be Tuesday before I see the tax guy at work. I discussed this with him last week.

Here is some basic information. www.knowyourtax.ie/tax-consultancy/gift-inheritance-tax/formation.

I'd be really interested to hear what you find out, will you cone back to post up what you find for us please???

(That link is dead)

Mongfinder General

househero wrote: »

I'd be really interested to hear what you find out, will you cone back to post up what you find for us please???

Sure, will do. This happened to my brother in law in the States. He got stung for gift tax on 50k. It got me wondering about what rules apply here. I asked around and apparently Revenue could take a case against a donee. I haven't heard of any cases here yet. Some of the clowns who've exited NAMA and are back in business should be hunted down and taxed on this.

murphaph

hfallada wrote: »

But stats are useless if starting from a small base, which you are. 1.6K properties for Dublin is tiny considering 1.3 million people in Dublin

Exactly. It's statistically insignificant.

Mongfinder General

househero wrote: »

This isn't litigation country. Don't dig up something you later regret.

Say what?

The_Conductor

Househero has been banned from this forum.

Regards

The_Conductor

Mongfinder General

Ok guys, the tax guy at work hasn't gotten back to me yet but I've done a little research and found this.

http://www.irishstatutebook.ie/2003/en/act/pub/0001/print.html#sec40

There could be a liability under Section 40 of Capital Acquisitions Tax Consolidation Act 2003.

There may be other provisions. As far as I'm aware, there are no cases which have been publicised by Revenue.