High rates cause homes to be repossessed

R

rodger

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Irish examiner

http://www.irishexaminer.com/ireland/court-grants-11-home-repossessions-399501.html


The father of two was able to make repayments until in 2012 KBC increased repayments from €1480 to €3000

That is the scandal of the fine gael labour government.

Abandoning families to the benefit of the banks.

Ecb rates have only come down since 2012. Down significantly.

Who to blame? Michael Noonan?

Hopefully this new government can do something about rates.

It is an urgent political problem.

During the famine the English were blamed for evictions. Now it's fine gael.
 
While the high rates don't help, they do not seem to have been a factor here. I have attended around 700 cases, and high rates have not yet featured as the reason for an order for possession.

"Earlier in court, Mr Wallace made the order for repossession, with a stay of 12 months, for the man’s family home after stating that the man’s debts were “insurmountable and no matter what you do, you are not going to get over it”.

The father who lost his home yesterday took out a mortgage of €425,000 in 2006 with KBC Bank and said he was able to make payments until 2012 when the increase in the variable interest rate saw his monthly payments rise from €1,480 to almost €3,000.

The man’s business collapsed and he was managing monthly repayments of sometimes €800."

I don't know what KBC's rates were in 2012. But I doubt if interest increases have resulted in a doubling of repayments since then.

He "sometimes" paid €800.

I would say that he rarely paid anything. Karl Deeter, Séamus Coffey and I have seen over 2,500 cases. We have seen only one case where someone who was paying something and who showed up in court, losing their home. And that was someone who had €95k in arrears on a mortgage of €185k.

It sounds as if this guy has no income. If so, his €425k mortgage is not sustainable.

Brendan
 
He says the arrears piled up to €125,000

Add that to €450,000

Gives €575,000

And then try to pay the interest and capital on that.

Maybe he hasn't a hope but increasing variable rates doesn't help struggling borrowers.

It only helps banks.

And the banks, having generated all these arrears then go to repossess.
 
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rodger said:
Maybe he hasn't a hope but increasing variable rates doesn't help struggling borrowers.
Click to expand...

Not sure which increasing variable rates you are referring to.

I would be very hesitant to blame the current interest rates on any respossession or inability to pay.
I'd argue that if you cannot pay back you mortgage agreement on an SVR of say 4.5% it is not sustainable even if the interest rate should fall by 1%. If you are already in arrears, lowering the interest rate by 2% wont help. Maybe extending the lifetime of the mortgage is the solution in that case.

Remember that the rule of thumb on interest rate over the lifetime of the mortgage (historically in Europe anyways) is 6% or thereabouts.
I still think that all mortgages, even nowadays, should be stress tested for 6%.

Not sure how you would blame the banks for "generating" these arrears.
 
Internationally and Europe:
Economy collapsed. Interest rates fell.
Except in Ireland.
Economy collapsed. Interest rates rose.
I would argue if people are being offered interest only. Which they are
And if rates are 5.65% (BOI investment)

Then a guy paying 2% can service a loan 3 times the amount what the guy paying 5.65% can service.

The rule of thumb you speak of doesn't apply now because ecb interest rates are 0%
Different times
 
The title of this thread is completely misleading - there was no mention at all of high rates in that article.

The first borrower was refreshingly honest - he went into arrears and his situation became insurmountable. Not the end of the world.
 
rodger said:
Irish examiner

http://www.irishexaminer.com/ireland/court-grants-11-home-repossessions-399501.html


The father of two was able to make repayments until in 2012 KBC increased repayments from €1480 to €3000
Click to expand...

That's a huge jump in interest. It'd be good to see the figures that explain this increase.

I'm with KBC now on 4.05%. That's a mortgage of €1400.
It'd need to jump several percent for my repayments to double. That didn't happen with KBC in 2012. The highest the SVR has been since 2011 is 4.5% (as far as I can remember). It's never been lower, since ive been with them, with KBC than it is now. KBC are still crap.

Maybe the guy in the article was paying interest only at the start. Then of course there'd be a huge increase when he started paying off the capital. Not sure how that's the governments fault though. We can't be sure though. As usual Irish newspapers don't really provide any details.
 
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According to the article


The father who lost his home yesterday took out a mortgage of €425,000 in 2006 with KBC Bank and said he was able to make payments until 2012 when the increase in the variable interest rate saw his monthly payments rise from €1,480 to almost €3,000.
Sarenco said:
The title of this thread is completely misleading - there was no mention at all of high rates in that article.

The first borrower was refreshingly honest - he went into arrears and his situation became insurmountable. Not the end of the world.
Click to expand...
 
rodger said:
He says the arrears piled up to €125,000

Add that to €450,000

Gives €575,000
Click to expand...

Hi rodger

Like most people, you don't understand how mortgage arrears work.

Check this out

Brendan Burgess' guide to Mortgage Repayment Calculations

You will see that unpaid interest is added to the mortgage balance. Arrears are not added.

If he was paying the interest only, the balance would not have increased, although the repayments would increase slowly.

Also, this paragraph is hard to understand:

"The father who lost his home yesterday took out a mortgage of €425,000 in 2006 with KBC Bank and said he was able to make payments until 2012 when the increase in the variable interest rate saw his monthly payments rise from €1,480 to almost €3,000."

upload_2016-5-16_8-14-21.png


A rate increase did not cause his repayments to double. An increase of 2% would cause his repayments to rise by about €450 a month.

KBC's variable rate has been 4.5% for some time. Was it ever 2.5%? I doubt it, but I don't know.

Brendan



Brendan
 
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Maybe arrears was the wrong choice of words

The point is the loan may have been restructured to increase the capital
 
rodger said:
The point is the loan may have been restructured to increase the capital
Click to expand...

Read my guide and you will better understand mortgages.

If he borrowed €450k and met the repayments until 2012, then the balance would have reduced.

But the key thing is that increased interest rates did not cause his repayments to double. And they have not resulted in his repossession.

In some cases, when the repayment increases due to higher rates, the borrower stops making any payment at all. But that is more the borrower's fault than the lender's fault. Anyone who pays a reasonable amount will not lose their family home.

Brendan
 
rodger said:
Irish examiner

http://www.irishexaminer.com/ireland/court-grants-11-home-repossessions-399501.html


The father of two was able to make repayments until in 2012 KBC increased repayments from €1480 to €3000

That is the scandal of the fine gael labour government.

Abandoning families to the benefit of the banks.

Ecb rates have only come down since 2012. Down significantly.

Who to blame? Michael Noonan?

Hopefully this new government can do something about rates.

It is an urgent political problem.

During the famine the English were blamed for evictions. Now it's fine gael.
Click to expand...

So what should the government have done?

The man himself said the following:

"He said: “The bottom line is that I went into arrears and it was insurmountable.”"
 
I said already: reduce variable rates

Why are banks in other countries charging 2%

Especially when borrowers here are facing a bigger crisis than people in Europe in terms of job losses etc
 
rodger said:
I said already: reduce variable rates

Why are banks in other countries charging 2%

Especially when borrowers here are facing a bigger crisis than people in Europe in terms of job losses etc
Click to expand...

"The man’s business collapsed and he was managing monthly repayments of sometimes €800.""

I'm no fan of the government but what would they have to reduce the variable rates to in order for the repayment to be 800 euro? Even then he was only 'sometimes' able to pay that.
 
I don't know what his balance was down to in 2012.
On a 400K mortgage with 0% interested over 20 years the principal repayments would be €1666 per month.
€1666.66 * 12 * 20
€800pm was half of what he needed to pay even with 0% interest. Not sure what the government could have done there.
 
There is a sense of entitlement in this country for a standard of living that should be provided by the state. Housing is one of those expectations. Unfortunately for those that pay, they must subsidise those that don't pay.
 
And so we get into the arguments of

"Our rates are too high" and "You can't repossess somebody's home"

Otherwise known as burning the candle at both ends. I don't know why this situation always occurs in Ireland.
 
I understand people want lower interest rates, as I do myself, but this has to equate to a particular risk profile as well. Even if 'European' rates were to apply here, would this person even be able to avail of them given he has gone into arrears?

The guys business failed completely, meaning he in effect has no income - or a dramatically changed one. In most European countries, he would be repossessed after around 6 months - not 4 years (since 2012)

We cannot have it every way - if we want the low interest rates, we have to accept that there will be higher deposits required, much quicker repossessions and much tighter controls on credit. The european model is based on low risk/low reward - which does not apply here by enlarge

I know which model I would pick, if it was my choice; but sadly its not !
 
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