# Irish people and debt



## whizzbang (4 Apr 2006)

Why is it we do not seem to have any fear of being in debt in this country? We seem to be much more afraid of not being "on the property  ladder" than oweing a bank 400k and not being able to repay them.

Is this because there is no cultural memory of Irish people being in huge debt? Is this the first time we have had easy access to big money?

Am I missing something?


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## kane3000 (4 Apr 2006)

Exactly, there has not been a downturn in Irelands Economy in living memory- Irish people prior to circa 1995 were so used to being poor that when all this cheap credit became available they went mad. 

But there are so many people who think that if it all goes bad they will just throw the house-keys back at the bank....no risk involved.

The only way is up anyway..things work different here.


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## JAM (4 Apr 2006)

I agree, we have a mortgage, but myself and Mr Jam at the time said that we did not want to overstretch ourselves financially because you jsut don't know what is round the corner. But we are so often amazed when we see friends of ours with new cars, holidays, etc.. they seem to lack nothing, and we can only assume that they are up to their eyes in debt. It seems people have lost patience and are not prepared to save for things, they want things there and then, and hey whats another couple of grand owed to some financial institution!
I am not condemning them, good luck to them if that is how they want to live their lives, but I just feel it is a slippery slope to get on to!


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## Duplex (4 Apr 2006)

The herding instinct explains to a great degree the behaviour of consumers /investors in the market place.  The adoption of particular fashions; in clothing, music and lifestyle choices are the most discernable indicators of this social phenomena.  Herding has positive aspects with regard to the maintenance of social cohesion, however it can be damaging when the herds actions lead to unthinking group behaviour.  

http://www.answers.com/topic/herd-instinct#top


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## Calina (4 Apr 2006)

kane3000 said:
			
		

> Exactly, there has not been a downturn in Irelands Economy in living memory- Irish people prior to circa 1995 were so used to being poor that when all this cheap credit became available they went mad.
> 
> But there are so many people who think that if it all goes bad they will just throw the house-keys back at the bank....no risk involved.
> 
> The only way is up anyway..things work different here.


I have to say that I think it's people who have no memory of the bad times who are the ones who have gone mad on credit. Anyone who remembers, on the other hand...in my experience tends to be a bit more circumspect. Incidentally, living memory extends back as far as WW2 (at least - there may still be one or two people who remember the civil war floating around too) during which time there were several lots of "bad times" or economic downturns. What we haven't had is a total property crash.


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## Squonk (4 Apr 2006)

I wonder if so many people are really in blind debt...there's a lot of 'old money' around i.e. a lot of people inheriting money and a lot due to inherit, based obviously on market prices of parent's houses. Granted, there are also a lot of people who are in debt up to their eyeballs trying to keep up with the Jones'..


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## whizzbang (4 Apr 2006)

On one hand we hear that we have loads of savings and on the other we hear that our personal debt is climbing at record rates. The questions is are the people getting into debt the same ones as have all the savings?


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## walk2dewater (4 Apr 2006)

whizzbang said:
			
		

> On one hand we hear that we have loads of savings and on the other we hear that our personal debt is climbing at record rates. The questions is are the people getting into debt the same ones as have all the savings?


 
I suspect that the debt is skewed towards the young, i.e. anyone under 40.  It is part and parcel of the great subsidising of the older generation via the property pyramid.  Ever wonder why the over 50s are the most ardent advocates of buying property?  Answer:  cos it’s funding their early retirement


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## CN624 (4 Apr 2006)

Debt doesn't matter to people at the moment, keeping up with the Joneses is all important. With houses there is at least an understandable desire to have a house of your own if you have a family. (The economics of buying vs renting until prices fall are being discussed elsewhere) 

But the competitive consumption between people has to be seen to be believed. When your neighbour/friend/enemy is driving an 06 and you are still plodding along in the old 03 people will talk. Its the same with plasma tvs, holiday homes, holidays & weddings. If your friends engagement ring cost €4000 yours must €5000. If they have bought a holiday home why haven't we?? 

At the moment Irish people believe our economy is indestructible, the only way is up. 20 years of growth anyone?? Reality has been suspended. 
Debt isn't important because you can stick it onto the mortgage and Bobs Your Uncle... what debt?


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## Theo (4 Apr 2006)

In David McWilliam's book, "the Pope's Children", he makes what I consider to be a very interesting point about the way the classes in Ireland are converging closer so that you now have a large middle class working the system. These are the people who are borrowing to fund their lifestyles today with what is apparently no thought for tomorrow. Hence the new cars, the luxurious holidays (not 1 but 2 and 3 holidays per year), designer clothes, jewellery, expensive watches, golf equipment and golf club memberships, gym memberships, spa treatments, gambling (have you noticed how popular this has become recently?) etc.

The working classes who are on minimum incomes and who do not qualify for loans, credit cards etc. simply spend everything they earn on a weekly basis or worse end up with the high interest moneylenders.

The wealthy classes are the ones investing in the businesses that provide the services and products to everyone else.

This is a realtively new phenomenon in Ireland since money only really arrived here in the 90's. This is a recognised pattern in the US and Ireland appears to be going that way.

I think the problem is that many Irish people confuse income with wealth. When you are earning 100k a year and "own" a house that seems to be going up in price all the time, you will feel wealthy and so spend more of your income. Suddenly, where you were satisfied with that '03 car outside before, now you just have to have the latest '06 gas guzzling SUV model because, well, you're making loads of money and its not a problem. And besides, you want everyone to know how "well" you're doing. 

Meanwhile, the person earning 30k a year and is the kind of person who borrows a travel guide from the library rather than buy one before going on holidays, is more than happy to drive a 16 year old car that is kept in good condition and invests at least 10% of monthly income first before paying anyone else is probably a lot wealthier than the other person, or certainly will be over time even if the income is three times or more less.

The point is, the amount, type and your use of any debt you owe is more a reflection on your personality (or on society as a whole) than on any economic circumstance. You can't blame banks for taking advantage and throwing money at people. This is their business, after all. And I'm afraid to say that I believe Irish society has become quite undisciplined with respect to debt and has become a show - off and even quite snobbery with it. Not just cars and property, but have you noticed the increased snobbery with respect to food for example? Or golf?

Debt can be a great thing when used correctly, but it appears to me it is being abused by the vast majority of Irish people because they are not willing to wait to earn anything first.


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## legend99 (4 Apr 2006)

Mortgage debt grew by €22 billion last year in Ireland from circa 77billion to circa 100 billion. In only 12 months.
See Table A2.2 in [broken link removed]


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## microsquid (10 Apr 2006)

OK, everyone seems agreed that the debt is v.v.high and may indeed be unsustainable.  Does this mean that the Joe Soaps who HAVE been sensible and been salting away their savings into the bank are inherently at risk from the behaviour of the grasshoppers fiddling in the sun?
Is the E1 on deposit: E9 in loans ratio used by the banks based on anything concrete (eg experiences with bankrupt banks/lending institutions during the depression) or just a guideline?
Do people think they're adhering to it?

MS masquerading as Jonah, yet again.


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## LexLuthor (14 Apr 2006)

microsquid said:
			
		

> Does this mean that the Joe Soaps who HAVE been sensible and been salting away their savings into the bank are inherently at risk from the behaviour of the grasshoppers fiddling in the sun?


 
How exactly would they be at risk?


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## woods (14 Apr 2006)

I agree that people should borrow to buy their house but not to buy the furniture and to get the gardens done etc etc. In the good old days you were happy to have a house and you moved in with a mattress on the floor and an electric kettle while you saved for furniture. I recall having newspapers selotaped to our windows for months before we got curtains. If you have extra money to spend then spend it on getting a biger house and not on the fittings. It will stand you better in the long run and it can be fun to eat off a cardboard box sitting on a pillow in front of the telly.


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## Neffa (14 Apr 2006)

LexLuthor said:
			
		

> How exactly would they be at risk?


 
I assume the poster meant that if the banks faced a major problem in the event of a property collapse, then some savings could be at risk if the collapse caused widespread instability in the banking sector


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## woods (14 Apr 2006)

Neffa said:
			
		

> I assume the poster meant that if the banks faced a major problem in the event of a property collapse, then some savings could be at risk if the collapse caused widespread instability in the banking sector


I am pretty sure that there is some sort of protection against that happening. If things get so bad that people will loose their savings then we will be in a Mad Max type scenario and only the strongest will survive. I will have the high wall built and the guns in the basement.


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## DrMoriarty (5 May 2006)

Some [broken link removed] from 'across the water'...?


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## autumnleaf (5 May 2006)

A pal of mine is always complaining about her shopaholism and credit card debt. In fairness, she does have great clothes. I suggested she put the card in cold storage and take out a bank loan to pay the debt (less interest) but she thought it sounded like too much trouble. We were watching the news at her place and there was something about SSIAs. She said "I probably should have taken out one of those, but I've never been much good at saving". 
A guy I know took out a loan to buy a 2005 Lexus last year. He says he needs a new car to impress the ladies. I tried to argue that all women aren't that shallow, but he gave me a cynical look. I guess with my 97 VW I'm not the type he's trying to impress anyway. 
I heard someone say the other day that it would be a good idea to get a 110% mortgage on an under-construction property and sell before it's finished. After all, "you'd pocket the price increase and lose nothing!" 
I'm not opposed to people treating themselves. Hey, I like new clothes and fancy-farmers-market food and I go abroad twice a year on average. But I think I would be scared if I was in debt to the extent some people. I'm talking about people with good salaries and no dependants. And yet I am the same age group (20s/30s). What's the story?


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## colc1 (5 May 2006)

CN624 said:
			
		

> Debt doesn't matter to people at the moment, keeping up with the Joneses is all important.
> 
> But the competitive consumption between people has to be seen to be believed. *When your neighbour/friend/enemy is driving an 06 and you are still plodding along in the old 03 people will talk*. Its the same with plasma tvs, holiday homes, holidays & weddings. If your friends engagement ring cost €4000 yours must €5000. If they have bought a holiday home why haven't we??


 
Do you really think some people could possibly be that childish I know one guy like that alright (cars)?  I am not disagreeing with you at all Irish people seem to be obsessed with keeping up with the Jones'!


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## Nermal (5 May 2006)

Neffa said:
			
		

> I assume the poster meant that if the banks faced a major problem in the event of a property collapse, then some savings could be at risk if the collapse caused widespread instability in the banking sector


 
isn't it something like 90% of the first 20K in each account is insured? i have no idea honestly, i just remember seeing a poster in an AIB branch to that effect...


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## Marie (5 May 2006)

Yes - they differ slightly but its approximately 90% of 20K regardless of the full amount in the account..........._if possible! _(there could be occasions - as in the depression - when even that return is not possible and that's all in the small print of _every _bank account, though few read it.


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## evan (6 May 2006)

I read an article in the independent last week that the biggest growth in first time buyers has been from young single women. If the market collapses then it is going to have pretty dramatic social consequences.


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## Resident (8 May 2006)

minor difference on loss info, but here it says it's lessor of 90% of loss or first 20k.
either way not good.

see: [broken link removed]


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## autumnleaf (8 May 2006)

evan said:
			
		

> I read an article in the independent last week that the biggest growth in first time buyers has been from young single women. If the market collapses then it is going to have pretty dramatic social consequences.


 
Why? Because they'll all be so desperate they'll take anyone as long as he can share the mortgage?


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