Why use this system of mortgages?

Scofflaw · 06-04-2010 12:26PM

Treehouse72 wrote: »

Danny, on page 1 you said you were cynical. Believe me mate, you are so far from cynical it's not true. Your level of credulity is frightening.

...

Finally, here's the solution to the problem you are trying to fix: let house prices fall more. Why in the name of sweet jumping electrical Jesus Christ are you looking for exotic ways to borrow more money to buy houses when there is a simpler option: make the houses cheaper?? What in the name of God is wrong with this solution? Why are you so eager to see prices sustained at somewhere close to where they are now? Seems to me you are emotionally and intellectually incapable of even envisaging this for some reason.

I feel depressed after reading this thread.

However shocked or depressed you may feel, can you restrain yourself from insulting other posters, please?

moderately,
Scofflaw

daltonm · 06-04-2010 12:26PM

Dannyboy83 wrote: »

About interest rates, I can agree.
This is a good point.

The thing is, as long as we are in the Euro, we are not going to see 1980s style interest rates.
AFAIK, the absolute ceiling would be 10%, and any of the Germans I know say this is just plain unrealistic as it would screw the German economy, so 4 or 5% is more realistic, perhaps 8% maximum.

Danny, I have to come back to the point about your view on interest rates. In the past week 2 main banks have hiked up their interest rates by half a % point, you will note that the ECB did not change their rates. The banks are not BOUND to the ECB rates, it is a guide.
The Germans therefore, who are considered the savers of europe, and who have a low percentage of mortgages (someone mentioned that 60% rent, it is important to realise here that the remaining 40% may own their own home BUT - not have a mortgage on it - major difference, they are not called the savers of Europe for nothing) look at interest as what they can GAIN on their savings rather than what they can LOSE on paying a mortgage.
In and around 5/6/7/% is seen as a NORMAL interest rate in a healthy economy - 10% in Europe could only mean that in Ireland we would be looking to 13/13/15%.
If the banks decide they need to up rates, then they will and have already started to, then when they ECB rates start to rise, then the banks will rise again.

Dannyboy83 · 06-04-2010 12:34PM

daltonm wrote: »

Danny, I have to come back to the point about your view on interest rates. In the past week 2 main banks have hiked up their interest rates by half a % point, you will note that the ECB did not change their rates. The banks are not BOUND to the ECB rates, it is a guide.
The Germans therefore, who are considered the savers of europe, and who have a low percentage of mortgages (someone mentioned that 60% rent, it is important to realise here that the remaining 40% may own their own home BUT - not have a mortgage on it - major difference, they are not called the savers of Europe for nothing) look at interest as what they can GAIN on their savings rather than what they can LOSE on paying a mortgage.
In and around 5/6/7/% is seen as a NORMAL interest rate in a healthy economy - 10% in Europe could only mean that in Ireland we would be looking to 13/13/15%.
If the banks decide they need to up rates, then they will and have already started to, then when they ECB rates start to rise, then the banks will rise again.

Assuming you are correct about the 15% interest rate, then I agree, the question I proposed seems ridiculous.

But a 15% interest will see most who have bought since the year 2000 bankrupt anyway, so it shouldn't be an 8% deposit but a 20% minimum.

daltonm · 06-04-2010 12:47PM

Dannyboy83 wrote: »

Assuming you are correct about the 15% interest rate, then I agree, the question I proposed seems ridiculous.

But a 15% interest will see most who have bought since the year 2000 bankrupt anyway, so it shouldn't be an 8% deposit but a 20% minimum.

Not ridiculous Danny, I feel people are being very harsh on you, it's hard at your age to view buying a home as anything other than a secure investment. From your teens on you have only ever seen wealth acquired, as a result of owning a home.

It really depends on the financial situation, if someone bought in 2000, paid a deposit and most importantly - didn't use their home as an ATM machine - i.e. released equity - then they should be fine.

For me if I was buying a home (I have said this on other sites) I would base it on 3 max 4 times ONE income and have a reasonable deposit. I would divide my salary into 48 or 50 weeks (as opposed to 52) to allow for being ill or on holiday. I would base the interest repayments as high as possible - rather than cheap teaser rates. And my term - max 25 years. On adding all that, I would then look for houses in that price range, if the house of my dreams was not in the bracket - then I wouldn't buy it because - I can't afford it.

Edit - it doesn't mean that the average person will never afford their own home, they will - when prices go down, and they will, because they have to.

Any broker or EA for example, who tell you that "it's the right time to buy" ask them to sign a guarentee to pay the difference in your pay packet or the difference in the interests rates if either or both of these things change, and they will and what seems affordable today could break your back in 6 months time.

Remember it is YOU that repays, no-one else.

Mad_Max · 06-04-2010 01:09PM

Dannyboy83 wrote: »

ooooooooooops - I said the "P" word!!!!! oooooooohhhhhhh!

Huh?

Dannyboy83 · 06-04-2010 01:10PM

daltonm wrote: »

Not ridiculous Danny, I feel people are being very harsh on you, it's hard at your age to view buying a home as anything other than a secure investment. From your teens on you have only ever seen wealth acquired, as a result of owning a home.

It really depends on the financial situation, if someone bought in 2000, paid a deposit and most importantly - didn't use their home as an ATM machine - i.e. released equity - then they should be fine.

For me if I was buying a home (I have said this on other sites) I would base it on 3 max 4 times ONE income and have a reasonable deposit. I would divide my salary into 48 or 50 weeks (as opposed to 52) to allow for being ill or on holiday. I would base the interest repayments as high as possible - rather than cheap teaser rates. And my term - max 25 years. On adding all that, I would then look for houses in that price range, if the house of my dreams was not in the bracket - then I wouldn't buy it because - I can't afford it.

Edit - it doesn't mean that the average person will never afford their own home, they will - when prices go down, and they will, because they have to.

Any broker or EA for example, who tell you that "it's the right time to buy" ask them to sign a guarentee to pay the difference in your pay packet or the difference in the interests rates if either or both of these things change, and they will and what seems affordable today could break your back in 6 months time.

Remember it is YOU that repays, no-one else.

Great post, Thank You!

All I can say is that if interest rates are realistically capable of approaching 15% in the short to mid future, then we are going to have an epidemic/crisis, it will be back to the taxpayer again (including me who has been renting for 7 years and doesn't own a home) to bail out all these people.
That would be the straw to break the camels back for me, I would have no choice but to leave the country.

What is the likelihood of this I wonder?
Is it even conceivable that interest rates would go that high?
Surely that would just wipe out any miniscule chance the country has of recovering in the next 50 years?

Dannyboy83 · 06-04-2010 01:14PM

Mad_Max wrote: »

Huh?

I was being attacked for bringing up property.
I didn't realise I wasn't allowed to say the P word on here.

My comment basically meant, the Generals who fought World War 2 were trying to fight the last battle (WW1) and using those tactics and got their asses kicked, meanwhile Guderian and Rommel were using new tactics and fighting WW2 and cleaned the floor with them.

I understand there are drawbacks and considerations to the 100% mortgage scenario, but mostly, people have been giving reasons which are relevant to what happen from 1997 to 2007, not what is happening now.

They are two totally different scenarios, pyramid vs. collapse

cranks · 06-04-2010 01:17PM

how about house prices fall to a level that could be paid for comfortably over a maximum 20 year period by a single/couple (take your pick).
What'd that make yr average 3 bed, semi - if we assume AIW somewhere in region of 35k?

The_Honeybadger · 06-04-2010 01:36PM

cranks wrote: »

how about house prices fall to a level that could be paid for comfortably over a maximum 20 year period by a single/couple (take your pick).
What'd that make yr average 3 bed, semi - if we assume AIW somewhere in region of 35k?

2-3 times AIW making it 100k or under for a decent 3 bed semi. That would be perfectly reasonable IMO, as they can be built for less than this, assuming the developer hasn't paid 30 million for a 5 acre site. However the national obsession with property ownership will never allow prices to fall this low.

daltonm · 06-04-2010 01:41PM

Dannyboy83 wrote: »

Great post, Thank You!

All I can say is that if interest rates are realistically capable of approaching 15% in the short to mid future, then we are going to have an epidemic/crisis, it will be back to the taxpayer again (including me who has been renting for 7 years and doesn't own a home) to bail out all these people.
That would be the straw to break the camels back for me, I would have no choice but to leave the country.

What is the likelihood of this I wonder?
Is it even conceivable that interest rates would go that high?
Surely that would just wipe out any miniscule chance the country has of recovering in the next 50 years?

But you are already paying for it with - NAMA.
The crisis is here, it's being covered up with SW payments, banks restructuring loans (3000 per month).

What you have is freedom - a lot of people do not.

Imagine a situation where a couple who bought a home in 05/06/06/08/ (maybe 09, it depends) using max multiples of two working people and basing it on the lowest teaser rate, 1 or 2%
Now one of them is unemployed, the mortgage is rising and the one left in employment is now looking to take a paycut/higher taxes to pay for NAMA.
Yes you will pay, but count up 7 years of renting, paying out for this service and then compare it with the above scenario.

AARRRGH · 06-04-2010 01:56PM

This thread is hilarious.

I have no doubt if the bank gave dannyboy83 a 100% mortgage, in 6 months time when he realises he is in quite a bit of negative equity he would be here complaining how the bank forced him to take out a large mortgage.

oflahero · 06-04-2010 02:00PM

Scofflaw wrote: »

However shocked or depressed you may feel, can you restrain yourself from insulting other posters, please?

moderately,
Scofflaw

I hope his/her skin is toughening up, because 'tis nothing compared to the comprehensive kicking being meted out over on the 'Pin: http://www.thepropertypin.com/viewtopic.php?f=4&t=29563

Dannyboy83 · 06-04-2010 02:22PM

oflahero wrote: »

I hope his/her skin is toughening up, because 'tis nothing compared to the comprehensive kicking being meted out over on the 'Pin: http://www.thepropertypin.com/viewtopic.php?f=4&t=29563

People are entitled to say whatever they like, all I'm asking is that you answer the questions and not be rude about it.
If you think it's ridiculous or just want to insult me, how about you just close the thread?

As far as I'm aware, I'm asking a fairly legitimate question here.
I'm not so sure what is so funny, only a handful of people have been able to give a decent answer and not simultaneously insult me.

Btw, I read the pin too, I'm a user over there.
They are not exactly the most optimistic crowd - are they?:rolleyes:
LMFAO!:D

The Mods had to enforce an "anti-glee" rule to prevent them laughing at people in misfortune, why do I care about people who take so much pleasure in other people's misfortune?

There are a lot of good posters, but its also heavily populated by many of the pessimists who populate these parts. If you were to take everything the pessimists say to heart, you wouldn't get out of the bed in the morning and probably turn the gun on yourself tomorrow.:p

DONT TAKE A BATH -- YOU CAN DROWN IN 3 INCHES OF WATER!!! SHOCK!!

K-9 · 06-04-2010 02:23PM

AARRRGH wrote: »

This thread is hilarious.

I have no doubt if the bank gave dannyboy83 a 100% mortgage, in 6 months time when he realises he is in quite a bit of negative equity he would be here complaining how the bank forced him to take out a large mortgage.

In fairness, I don't think he would. That usually is reserved for people who bought thinking the house was a goldmine.

Dannyboy83 · 06-04-2010 02:25PM

AARRRGH wrote: »

This thread is hilarious.

I have no doubt if the bank gave dannyboy83 a 100% mortgage, in 6 months time when he realises he is in quite a bit of negative equity he would be here complaining how the bank forced him to take out a large mortgage.

Your posts are hillarious.
You never tackle any questions on the subject, you just swoop in with a personal attack of some sort.

Negative equity doesn't matter a great deal unless you plan to move.
Things won't stay bad forever, no matter how much the doom mongers here would like to scream and shout:rolleyes:

oflahero · 06-04-2010 02:35PM

Dannyboy83 wrote: »

People are entitled to say whatever they like, all I'm asking is that you answer the questions and not be rude about it.
If you think it's ridiculous or just want to insult me, how about you just close the thread?

It's tough love. You'll be glad of it when it's over. No-one wants to see someone getting into property-related difficulties *only now* considering the last couple of years we've had. I'd say that's the reason for the singular shoeing you've been experiencing.

Dannyboy83 wrote: »

The Mods had to enforce an "anti-glee" rule to prevent them laughing at people in misfortune, why do I care about people who take so much pleasure in other people's misfortune?

You'd do well to remind yourself that you're one of the fortunate ones - debt-free. There's thousands of people all over this island staring down the barrel of mortgage debt, job insecurity, pay cuts, rising rates and being stuck in a boghole in nowherestown. Why so keen to join them?

AARRRGH · 06-04-2010 02:38PM

Dannyboy83 wrote: »

Your posts are hillarious.
You never tackle any questions on the subject, you just swoop in with a personal attack of some sort.

Are you for real?

AARRRGH wrote:

Saving should be a normal part of life.

You should be saving for a number of years before you buy a property.

If you can't afford to save money, you can't afford an expensive house.

AARRRGH wrote:

The reason banks want you to have a deposit is because:

a) you are sharing the risk with them
b) if the value of their investment falls, they have an 8% - 10% breathing space.

murphaph · 06-04-2010 02:42PM

Dannyboy83 wrote: »

Negative equity doesn't matter a great deal unless you plan to move.

...but you'd be asking a bank to lend you 150k for an asset that will be worth 140k in a couple of months time, without giving them any of YOUR money as a deposit/incentive to repay the loan. Can you see why the bank wouldn't be too keen on lending someone 150k for an asset that will soon be worth less, whilst at the same time not even asking for a deposit to incentivise the borrower to repay? The borrower could leg it to Australia in 3 months time when they realise the loan is worth a lot more than the house.

Dannyboy83 · 06-04-2010 02:42PM

oflahero wrote: »

It's tough love. You'll be glad of it when it's over. No-one wants to see someone getting into property-related difficulties *only now* considering the last couple of years we've had. I'd say that's the reason for the singular shoeing you've been experiencing.

The reason for the shoeing is because the board is half populated by total pessimist ****, who don't know why they are screaming and shouting slogans, who can't explain the reasons behind the slogans, they just shout them.

PROPERTY=BAAAAAAAADDDD!!!!

You'd do well to remind yourself that you're one of the fortunate ones - debt-free. There's thousands of people all over this island staring down the barrel of mortgage debt, job insecurity, pay cuts, rising rates and being stuck in a boghole in nowherestown. Why so keen to join them?

<

Look at my join date
<

Look at my post count

Are you for real kid?

Do you not think I'm living in this world too?
Do you no think I've been reading this forum too?
Have you actually read any of the posts I've made?

If you want to tackle the subject specifically, you're more than welcome.
Giving me big bad and mostly irrelevant stories is just plain useless, I'm not a daily fail reader.

fontanalis · 06-04-2010 02:43PM

Dannyboy83 wrote: »

Your posts are hillarious.
You never tackle any questions on the subject, you just swoop in with a personal attack of some sort.

Negative equity doesn't matter a great deal unless you plan to move.
Things won't stay bad forever, no matter how much the doom mongers here would like to scream and shout:rolleyes:

Might just stick in your craw a bit when your paying golden egg prices for a turd.
I truly believe no lessons have been learned from the previous mess and the same thing would easily happen again.

Dannyboy83 · 06-04-2010 02:44PM

AARRRGH wrote: »

Are you for real?

See my follow posts.

You make a whole load of statements, but cannot justify any of them when questioned.

Then out come the personal attacks and whatever.

p.s. I await the - well, if you don't know, then there is no point in telling you!:D

fontanalis · 06-04-2010 02:46PM

Dannyboy83 wrote: »

See my follow posts.

You make a whole load of statements, but cannot justify any of them when questioned.

Then out come the personal attacks and whatever.

p.s. I await the - well, if you don't know, then there is no point in telling you!:D

Ooh a smiley, you really showed him!

Dannyboy83 · 06-04-2010 02:49PM

murphaph wrote: »

...but you'd be asking a bank to lend you 150k for an asset that will be worth 140k in a couple of months time, without giving them any of YOUR money as a deposit/incentive to repay the loan. Can you see why the bank wouldn't be too keen on lending someone 150k for an asset that will soon be worth less, whilst at the same time not even asking for a deposit to incentivise the borrower to repay? The borrower could leg it to Australia in 3 months time when they realise the loan is worth a lot more than the house.

Thanks, good answer.

About legging it to Australia, people who leg it to Australia now will be pursued regardless. It's not a viable reason imo. (just my opinion of course)

Even if you declare bankruptcy, as far as I understand, you can still be pursued for every single cent, if you ever acquire any, at any future date.

If 100% mortgages were an option, I imagine the market would begin to stabilise.
Most people who sign onto property in this scenario are not buying investments, they are buying 'homes'.
They are buying it to live in it.

Its a completely different scenario compared to the last decade.

Do we have any figures on how many homeowners have done a runner from Ireland since 2008?

Dannyboy83 · 06-04-2010 02:50PM

fontanalis wrote: »

Ooh a smiley, you really showed him!

:rolleyes:

oflahero · 06-04-2010 02:51PM

Dannyboy83 wrote: »

Are you for real kid?

Do you not think I'm living in this world too?
Do you no think I've been reading this forum too?
Have you actually read any of the posts I've made?

Getting angry and patronizing about it won't help. Plenty of concrete analysis has been thrown your way answering your queries on this thread alone, so I'm sorry if that's the way you still feel, and you still are unconvinced as to why easy credit is a bad thing.

Dannyboy83 · 06-04-2010 02:53PM

fontanalis wrote: »

Might just stick in your craw a bit when your paying golden egg prices for a turd.
I truly believe no lessons have been learned from the previous mess and the same thing would easily happen again.

What golden egg prices?
Are we reading the same thread?

The house example given is 150k on a 35k salary .... i.e. 4 times!
Traditionally, its always been 3 times!

What are you talking about 'learning from the previous mess'?
The subject here is the DEPOSIT!!!!!
D-E-P-O-S-I-T!!!!!

Seriously, I understand some of you have gotten burned by property, but life goes on fellas! get a grip! People are still gonna continue getting married, having babies and buying houses, long after this financial crisis is a distant memory!

Dannyboy83 · 06-04-2010 02:55PM

oflahero wrote: »

Getting angry and patronizing about it won't help. Plenty of concrete analysis has been thrown your way answering your queries on this thread alone, so I'm sorry if that's the way you still feel, and you still are unconvinced as to why easy credit is a bad thing.

Angry and patronising?

Who tried to ridicule me on my own thread by linking this post to another forum?:rolleyes:
Who told me "the shoeing will do me some good, for my own benefit"?

Seriously, go away and grow up kid, stop annoying me, will ya?

K-9 · 06-04-2010 03:03PM

Dannyboy83 wrote: »

What golden egg prices?
Are we reading the same thread?

The house example given is 150k on a 35k salary .... i.e. 4 times!
Traditionally, its always been 3 times!

What are you talking about 'learning from the previous mess'?
The subject here is the DEPOSIT!!!!!
D-E-P-O-S-I-T!!!!!

Seriously, I understand some of you have gotten burned by property, but life goes on fellas! get a grip! People are still gonna continue getting married, having babies and buying houses, long after this financial crisis is a distant memory!

Would a Rent to Buy scheme work for the deposit?

oflahero · 06-04-2010 03:07PM

Dannyboy83 wrote: »

Angry and patronising?

Who tried to ridicule me on my own thread by linking this post to another forum?:rolleyes:
Who told me "the shoeing will do me some good, for my own benefit"?

Seriously, go away and grow up kid, stop annoying me, will ya?

Ah what's the point...

Sarn · 06-04-2010 03:07PM

Dannyboy83 wrote:

You make a whole load of statements, but cannot justify any of them when questioned.

AARRRGH wrote: »

The reason banks want you to have a deposit is because:

a) you are sharing the risk with them
b) if the value of their investment falls, they have an 8% - 10% breathing space.

In fairness, I would consider the above justification.

If the banks were to start handing out 100% mortgages again where would the line be drawn? They were originally intended for 'professionals' in secure well paying jobs. The eligibility criteria rapidly disappeared which further fuelled our housing bubble.

If the housing market requires 100% mortgages to stabilise it, the requirement for deposits is all the greater given that this would suggest there is worse to come.

Why use this system of mortgages?

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