# What happens to a Euro mortgage if the currency collapses?



## oliver1975 (28 Nov 2011)

If the Euro collapses, I assume that a mortgage would get converted into punts.

But what if the peripheral countries were forced to leave the Euro but the currency itself still existed - could a bank keep the loan in Euros, which would have to be repaid from a salary earned in devalued punts?

Also, what happens to the ECB if the Euro collapses? Would it cease to exist, having no further function? If this happened, what would happen to tracker mortgages?


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## julius128 (30 Nov 2011)

Million dollars question, however I think all deposits and loans must be converted to punt, it makes no sense that only deposits converts and loans stay in Euro. you have taken any loan including mortgages in this country with the currency of this country, so if currency change everything must be changed.
Any country is operating in A currency so all trading must be in that currency.

If whole Euro collapse or Ireland quits then there will be no more ECB or ECB plays no more role in Ireland hence trackers must follow another central bank which will be Irish central bank interest rate I suppose.


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## Mrmr (30 Nov 2011)

julius128 said:


> Million dollars question, however I think all deposits and loans must be converted to punt, it makes no sense that only deposits converts and loans stay in Euro. you have taken any loan including mortgages in this country with the currency of this country, so if currency change everything must be changed.
> Any country is operating in A currency so all trading must be in that currency.



But would owing in the 'new' currency effectively be a devalued haircut on that debt owed to the European funding bank? 
Would that be allowed or would they be allowed to demand no haircut, and payment in Euro? I don't even know if that's a valid question? Sorry!


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## serotoninsid (30 Nov 2011)

This question has come up on a number of occasions on aam - without full consensus as to how it will play out.  I see that in this thread, folks are suggesting that euro mortgage debt would be converted to on punt nua.  On other threads, it has been suggested that the debt itself would be kept in euro - with customers paying back the equivalent in punt nua.  Seems unfair if all our deposits are taking a haircut (but then we know that 'fair' doesn't necessarily apply to what has gone on over the past couple of years!) but the suggestion is that the banks would make a case that they borrowed in euro to finance the mortgages and are entitled to repayment in euro OR euro-equivalent. 

The aspect in relation to tracker mortgages - and what would become of them is interesting.  Can anyone say with any degree of authority that they would still maintain the tracking element i.e. if no euro, then they can track the punt nua?  Is it safe to assume that if there is still euro - but not in Ireland, they would still track the euro?

A lot of different permutations to this...would be good to get some sort of consensus of the most likely outcome..


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## keary31 (30 Nov 2011)

would there be new contracts wonder would the mortgages be void...


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## Codogly (30 Nov 2011)

*Mortgage to Punts*

I believe the banks would have no option but to convert mortgages to punts because the asset used to back the mortgage is valued in punts.
Example :  Mortgage 200k Euro, Secured on Property now valued at 100k euro.
Euro fails :
Old Euro -v- New Punt  Exchange Rate estimate : 1 Euro = 2 Punts (if we're lucky - i imagine with could be a lot worse)

So ; If bank keeps mortgage in Euro situtation now is :
Mortgage 400k Punt Secured on Property now valued at 200k Punt if the property market doesnt totally collapse which is possible after a euro exit.

Conclusion : why would the home owner take a doubling of their mortgage for a property falling in value...i'd say to the bank if they dont keep the t/f of the loan on a 1 for 1 basis then i will stop making repayments and they can take me through the courts ...
Banks position : if we start proceedings they might get the property in 18/24 months time after legal battle and then we have a house thats difficult to sell and only worth 25% of what we have outstanding on our books with no real hope of getting anyother money back from the customer.
Surly makes more sence to work with thwe customer and hope that they can get the original 200k back over the life of the loan.


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## potnoodler (30 Nov 2011)

How many banks will still be standing 6 months after a the euro disintergrAting, I'd imagine country after country will hit the wall across the globe, does anyone really have any idea what the end result will be , can the global banking system hold up as german, french , uk , american  , chinese banks collapse after massive debt default.
Sounds alarmist but how else will it work, I mean who really new how open the Irish banks were


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## DB74 (30 Nov 2011)

*Leaving the Euro could cause people to lose their tracker mortgages*



serotoninsid said:


> The aspect in relation to tracker mortgages - and what would become of them is interesting.  Can anyone say with any degree of authority that they would still maintain the tracking element i.e. if no euro, then they can track the punt nua?  Is it safe to assume that if there is still euro - but not in Ireland, they would still track the euro?



Tracker mortgages track the interest rate, not the currency

Unless I'm way off here


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## Slim (30 Nov 2011)

In my opinion, if the RoI pulls out of the Euro, then all RoI holdings, contracts, mortgages will be denominated in punt nua or if they cannot be, for example, you borrowed from a non resident bank and they hold the euro as their currency [although I don't think that will be possible in many cases due to our Central Bank law] then you still owe the sum in either punt nua ( Euro amont of mortgage x the rate for PN) or euro and you have to convert PN to € regularly to pay the money back.

Either way, your wages (if your lucky) or social welfare will be paid in PN and at the rate equivalent to the euro rate x the PN conversion rate. "No Change Rodney", except the cost of imports will increase and travel costs will rise plus all theother downside of not being part of the euro ( interest rates will rise too!) etc. Short term chaos but long term control of own economy again.


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## Brendan Burgess (2 Dec 2011)

The specific issue of what happens to tracker mortgages is discussed in this thread.

What happens to tracker mortgages if the euro collapses?


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