# Increase in House Repossessions, are borrowers sufficiently warned about risk?



## whathome

An article in the Independent today highlights a significant increase in the repossession of houses by financial institutions.

http://www.unison.ie/irish_independent/stories.php3?ca=9&si=1783214&issue_id=15301


> EVIDENCE is emerging of a significant increase in the repossession of houses by financial institutions as owners struggle to meet their mortgage repayments and are finding it difficult to sell their houses at realistic prices.


 
Is the standard "Your home is at risk" small print warning sufficient to make borrowers aware that they can actually lose their home if they do not keep up payments?

Is there a general impression amongst Irish borrowers that financial institutions in Ireland don't repossess homes?

_No discussion about house prices please._


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## DrMoriarty

*Re: Key Post: How risky is property investment?*

It's worth pointing out that Brendan's post on How risky is property investment? is from nearly five years ago, and referring for present-day context to this article in today's _Sindo_ (free registration required) regarding the increase in house repossessions in recent years.


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## Brendan Burgess

*Re: Key Post: How risky is property investment?*

That Sindo article is purely anecdotal. The only numbers quoted are as follows:



> Its most recently compiled figures, now five years out of date, show a drop in the numbers of repossessions, thanks to economic prosperity and the then booming property market. In 1995, 193 houses were repossessed by building societies compared with 25 in 2002. But in January, Irish Life & Permanent reported 14 repossessions on its own, an indication that the total for all institutions combined must have risen significantly.



The rest of the article confused repossessions with court orders. 

What did the 14 repossessions relate to? In 2006 as a whole, or just in January 2007?  What share of the mortgage market does Irish Life and Permanent have? 20%? That would be 90 repossessions in 2006.  Still a lot less than 1995.

Brendan


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## Ravima

I think that most people who borrow money know that it must be paid back or else....................

Having said that , if one does have difficulties in repaying nay debts, there is help available to assist in rescheduling loans, such as MABS and the most important thing with home loan, is to approach lender before things get so bad that lender is chasing you.


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## DrMoriarty

*Re: Key Post: How risky is property investment?*

Ah, Jayzus, I said 'context', not hard facts! I was just pointing out the time lag between your observations about risk back in 2002 and the current headlines in the meeja.  

By way of context, (presumably) more [broken link removed] would point to a significant increase in personal debt, which trebled in the decade to 2005. To date, this has been matched by the exceptional growth in house prices over the same period, and the value of their house accounts for a significant percentage of most people's net worth. But while 82% of households in Ireland are homeowners, only 36% hold any other form of wealth. _If_ property values are inflated at the moment, and/or _if_ interest rates continue to rise (by up to 0.75% this year, some predict), and/or _if_ property values fall or stall, might this not lead to an increase in repossessions, given the number of 95% and 100% mortgages out there?

Are you telling me we're _not_ [broken link removed]?


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## gearoidmm

*Re: Key Post: How risky is property investment?*

I would have thought that in the contest of a rapidly rising property market, house repossessions would be extremely rare as in the event that someone could not make their repayments they could either refinance or sell without much difficulty.  Even in the current slowing market unless someone bought in the past 6 months they should have enough equity built up in their house to refinance/sell at a profit.

Brendan is absolutely right, this is what typically passes for analysis in the Sindo - anecdotes with no solid data to back it up.


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## Panzraam

*Re: Key Post: How risky is property investment?*



> Even in the current slowing market unless someone bought in the past 6 months they should have enough equity built up in their house to refinance/sell at a profit.


 
Wow!! I bought a house nine months ago and paid 9% Stamp Duty + .5% legal fees + surveys + moving expense. Do you really think there has been sufficent growth in the market to allow me to sell at a profit? My impression from the media/daft report was that there had been no/negative growth in the last six/nine months.


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## DrMoriarty

*Re: Key Post: How risky is property investment?*

I agree about the (un)reliability of the _Sindo_ article; nothing new there — and I only linked to it because the 'eye-catching'  headline had caught my eye this morning.

But what is it exactly that's so different about the situation in Ireland compared to, say, N. Ireland, where house price growth is now the most rapid in Europe, at 36% in 2006 (source BBC business news, here) or even the UK generally — the only one of the 'big four' markets to have outstripped its 2005 performance last year, growing 10% despite forecasts — and where repossessions _are_ distinctly on the rise (source Beeb news, again).

My question's genuinely borne of curiosity, as I know very little about the hard economics of it all — is it just down to differences in demographics (our low density and high immigration rates _vis-à-vis_ the UK?) Regulatory climate (a government that loves the construction industry?) Better legal protections for homeowners? ECB _vs_ Bank of England interest rate policies? Some other kind of market dynamic? Surely an increase in house repossessions isn't something that 'just couldn't happen' here...(?)


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## shanegl

That was a very poor article, low on facts and high on hype.

I would say people are sufficiently warned of the dangers. But (for example) if someone is willing to lie about income levels to get a mortgage, no amout of warning them will help.


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## bankrupt

shanegl said:


> I would say people are sufficiently warned of the dangers. But (for example) if someone is willing to lie about income levels to get a mortgage, no amout of warning them will help.


 
When I went bought a house a few years ago, the possibility of repossession was not mentioned once.   Do people really need to be warned that they are obliged to pay back a mortgage though?   Surely if you take out a loan to purchase a house you must understand that it is not yours until the loan is paid off?


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## liteweight

Couldn't get into that link to read article...keeps bringing me back to registration. I am registered but having login problems.

In general though, I think there is an impression out there that family homes will not be repossessed. I don't have anything to back that up except conversations with friends who feel it will never happen here.

Perhaps that was the way in the past but banking has a whole 'new face' in celtic tiger Ireland. It wouldn't surprise me to hear of more and more repossessions. However it's not that easy to repossess a family home, particularly where couples have contacted the institution and tried to work something out with them. There is a lot of help out there as another poster has already suggested.

I think everyone who purchases realises that they must pay their mortgage in order to retain the property. Small print or not, it's included in advertising everywhere. I don't think that's the problem. The problem is that people seem to think it will never happen to them! When Michael McDowell hinted that there would be a change in stamp duty in the budget, FTBs held off. Subsequently he was blamed for making people miss the boat, i.e. interest rates rose and those who could have borrowed X amount based on their salary, could now only borrow Y amount! To my way of thinking, he did them a favour. Perhaps they might not have been able to afford the increase. The view seems to be that they should have gotten in there while lending institutions would give them the max!

It's the above attitude that I find particularly worrying and I think that those who share that view are also the type who probably wouldn't seriously look at what a 'warning' means, even if it was written in letters ten feet high.


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## Brendan Burgess

I don't think that there is any doubt that more people are falling into arrears on their mortgages. People have borrowed heavily and repayments have risen. 
As long as they are still in work and making some repayments on their mortgages, they are unlikely to face repossession. 

House price falls,in themselves, won't force anyone to lose their home. It doesn't actually matter to me what value my home is as long as I am keeping up my repayments. 

If people fall into arrears and don't speak to their lender, they may get into trouble. Most of the lenders claim that they are forced to issue repossession proceedings simply to get the borrower to talk to them. Even then, the borrower often does not show up in court. The Registrar of the court then issues a repossession order, but usually puts a stay of execution on it. 

In my limited experience of a few such court cases, the registrars/judges have been very reluctant to grant repossession. My experience might be biased as these were all Irish Nationwide cases. 

When the borrower is absolutely unable to make repayments, the lender will usually allow them sell the house themselves so as to maximize the proceeds. I am not aware of any recent cases of eviction followed by a "repossession" sales.

I don't know if any such statistics are kept. 

Brendan


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## room305

*Re: Key Post: How risky is property investment?*



gearoidmm said:


> I would have thought that in the contest of a rapidly rising property market, house repossessions would be extremely rare as in the event that someone could not make their repayments they could either refinance or sell without much difficulty.



I think the rising property market is more than counterbalanced by rising interest rates. As many posters on AAM seem to be unable to grasp, just because your house is worth more than you bought it for, does not mean a lending institution will be automatically willing to "top-up" your mortgage.

I would think that if interest rates continue rise then repossessions and short sales are inevitable.


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## whathome

liteweight said:


> In general though, I think there is an impression out there that family homes will not be repossessed. I don't have anything to back that up except conversations with friends who feel it will never happen here.


Absolutely, that's the impression I am getting from conversations with friends and family. They know that the banks can repossess but the feeling is that it doesn't really happen in this country. I don't know where that perception originates from. 

I wonder if the recent trend of mortgage securitisation by institutions will make them more likely to repossess due to liability on the securitisation package.

One good thing about yesterday's article is that it will increase awareness of risk when taking on a mortgage - repossession can happen in this country.


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## ClubMan

bankrupt said:


> When I went bought a house a few years ago, the possibility of repossession was not mentioned once


I'm pretty sure that the mortgage related documentation states that "your home may be at risk if you do not keep up your mortgage repayments" in at least one place (and not necessarily just the detailed terms & conditions).


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## Vanilla

ClubMan said:


> I'm pretty sure that the mortgage related documentation states that "your home may be at risk if you do not keep up your mortgage repayments" in at least one place (and not necessarily just the detailed terms & conditions).


 

Sure it does, but my experience is that many people don't read their home loan offers. Every time I go through mortgage documentation with a client I tell them if they do not keep up the repayments the house can be repossessed. However as this is often part of an hour long meeting ( or more) where I am also trying to impart many other facts and details to clients, it may be just one more thing that passes over their heads. There is a certain glazed quality that comes to their eyes at which point I am fairly sure they have stopped listening to me and are merely waiting for me to point to where they must sign. I do keep asking if they understand or if they want to ask a question but there are only a few clients who seem to really want to understand the process and all the details.


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## ClubMan

Do they bother reading the documents that they sign?


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## Vanilla

ClubMan said:


> Do they bother reading the documents that they sign?


 

God, no. I've even had clients cut across my explanations, asking me to 'just tell me where to sign'.


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## liteweight

> In my limited experience of a few such court cases, the registrars/judges have been very reluctant to grant repossession. My experience might be biased as these were all Irish Nationwide cases.



This is my impression too. Explanations given have mainly been based on the 'family' being enshrined in the constitution and this creates a reluctance to repossess. However, I think this might well change as has everything else in Ireland in recent times. I don't mean the family will be taken out of the constitution, but the respect and duty afforded to it will no longer apply as more and more people turn to foreign banks. As Whathome says, securitisation may begin to play a role as I believe lending institutions obviously seek to cover themselves and will utilise whatever means necessary.

Repossesion in Ireland, I'm told, is a long drawn out affair at present. Perhaps Vanilla could comment on that. I agree with her about the 'glazed look' and people seem to think that all they need to know is whether they can get the money or not. Our solicitor has always informed us that property can be repossessed if we don't keep up payments.


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## Vanilla

> Repossesion in Ireland, I'm told, is a long drawn out affair at present. Perhaps Vanilla could comment on that.


 
It is, yes. I'd agree with Brendan that judges are reluctant to grant an order for repossession until every avenue has been explored and the mortgagees have been given every opportunity to deal with the matter. I couldn't comment on whether they are more frequent, I simply don't know. I personally haven't seen any increase in repossessions among MY clients, although I have seen a huge increase in remortgaging, top ups and equity releases of varying kinds.


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## Remix

Renters accept that the landlord may request to repossess their house with relatively short notice. This has and continues to happen to individuals and families all over Ireland.

Involuntarily moving house is a bl**dy awful experience but it's not the end of the world.

Far worse, I think, than a forced move for owners is the financial carnage that has led up to it. This could include negative equity and ever increasing amounts of interest and penalties to pay.

The bank "allowing" a family to stay in the house does not solve these problems for them. In fact the financial problems could get worse by staying in a house they can't afford if the micro or [broken link removed]

In the last housing bust in the UK, it was not unknown for people to enter voluntary repossession just to get away from an ever deepening money pit.


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## room305

Remix said:


> In the last housing bust in the UK, it was not unknown for people to enter voluntary repossession just to get away from an ever deepening money pit.



In the US, the massive increase in "short sales" (i.e. where the seller cannot afford to repay their mortgages, sells the house at a price lower than the outstanding mortgage balance and asks the bank to 'write off' the balance) has attracted the interest of the IRS. Under US tax law, debt write offs can be viewed as a gift from the lending institution to the beneficiary and attract associated gift taxes.

Anyone know if the revenue here take the same view of debt settlements?


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## KalEl

Vanilla said:


> It is, yes. I'd agree with Brendan that judges are reluctant to grant an order for repossession until every avenue has been explored and the mortgagees have been given every opportunity to deal with the matter. I couldn't comment on whether they are more frequent, I simply don't know. I personally haven't seen any increase in repossessions among MY clients, although I have seen a huge increase in remortgaging, top ups and equity releases of varying kinds.


 
Is there not specific legislation protecting the family home? I thought it was nigh on impossible for a bank to repossess in these cases...perhaps the repossessions are "investors" who've bitten off more than they can chew?
I agree with other posters view on the article...I bought it to read on a flight, saw that article and thought it'd be interesting. The reality was wooly rubbish with very little to back it up. Surprised Brendan O'Connor didn't write it...he writes pretty much everything else in that "paper".


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## mf1

There is no actual protection for a "family home" when the owners can no longer afford to pay for the property. 

In very simple terms, if you own a house worth 500K and you have a mortgage of 450K and you begin to go into arrears on your mortgage, financially it makes more sense ( if you can) to sell the house and discharge the mortgage rather than ( if such be the case) continue to incur debt. 

I deal with many very emotionally charged debt situations where the blanket phrase " but its my family home" is hurled at me as if in some way that made the debt irrecoverable - that is just not the case. Increasingly, the Courts will simply look at the facts and make the necessary orders if 
(a)the debt is due, 
(b) the Banks are looking for possession and 
(c)there is no possibility of the debt being paid. 

It is far kinder in the long run to do this than to allow a debt to accumulate. 

In family law cases, it is more and more usual for the house to be sold and the proceeds split to enable both to purchase again - but in many cases people want to stay in the lovely redbrick and the thought of a new build in outer suburbia as a replacement brings us back to "but its my family home"! 

Is it starting to happen? I don't see any evidence of it at all but I agree with Vanilla that my clients continue to borrow on built up equity to fund life style  expenses which to me only means that they are living beyond their means.

Oh, it will all end in tears.

mf


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## ClubMan

Vanilla said:


> although I have seen a huge increase in remortgaging, top ups and equity releases of varying kinds.


For "lifestyle" expenditure such as _mf1 _alludes to?


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## KalEl

ClubMan said:


> For "lifestyle" expenditure such as _mf1 _alludes to?


 
It must be...I reckon people are buying X5's, taking round the world trips, joining golf clubs etc etc etc to a much greater degree than any of us even suspect.


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## mf1

On the last 2 top ups I did, the conditions were that the car loans, ( plural), overdraft and Visa card debts( plural) ( total approx: E45-60K) were to be discharged from the loan cheque leaving modest enough balances for holidays and home improvements. 

So yes, I think the top ups are funding lifestyle. And that does not compute to me. 

mf


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## Abbeykiller

KalEl said:


> Is there not specific legislation protecting the family home? I thought it was nigh on impossible for a bank to repossess in these cases...perhaps the repossessions are "investors" who've bitten off more than they can chew?
> I agree with other posters view on the article...I bought it to read on a flight, saw that article and thought it'd be interesting. The reality was wooly rubbish with very little to back it up. Surprised Brendan O'Connor didn't write it...he writes pretty much everything else in that "paper".


This existed in some States in the US - Texas, and Florida to name two. I think it's known as the 'Ranch law' and stems from way back when a rancher might lose everything in a bad year and rack up some big debts, but he could never have his ranch taken from him. 
Not sure if they have changed it now after some executives involved in Enron and Worldcom bankruptcies bought big million dollar properties in Florida then declared chapter 7 (personal bankruptcy in the US) - this meant that could be hit with anything but would emerge from the bankruptcy with a multi million dollar property to soften the pain.


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## ClubMan

mf1 said:


> On the last 2 top ups I did, the conditions were that the car loans, ( plural), overdraft and Visa card debts( plural) ( total approx: E45-60K) were to be discharged from the loan cheque leaving modest enough balances for holidays and home improvements.
> 
> So yes, I think the top ups are funding lifestyle. And that does not compute to me.
> 
> mf


Do you find many people paying for their cars etc. over the 20-30 years of their mortgage loan and do they realise the cost implications!?


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## Vanilla

ClubMan said:


> For "lifestyle" expenditure such as _mf1 _alludes to?


 
Sometimes I don't know why people top up or remortgage. It's not really any of my business. Sometimes I do know because the loan is conditional on certain loans being repaid from the new mortgage by me. If I see that someone is consolidating loans such as car loans into a mortgage I always mention to them that they should try to still treat it like a car loan and increase payments to repay at least that portion over a shorter term, but I'm not a financial adviser and I'm not their mother, so while I try to give a bit of advice I wouldn't be dogmatic about it.

Thankfully I have noticed that some of my clients are simply more financially astute and are remortgaging to avail of better rates. Thanks to AAM, if someone mentions a concern over a rate to me, I can steer them towards better rates. If I see a client coming in with a loan offer where the rate is clearly well above average I do try to offer a bit of guidance on finding a better rate, depending on circumstances. Sadly sometimes I see clients coming in with loan offers from Start Finance or GE Money where the rate is twice the normal rate because they have a poor credit rating and have no other option. In those circumstances I do try to advise them not to remortgage in the first place if there is any other option, or if they don't have an option to try to keep up repayments just until they can switch to a better rate and then switch as quickly as they can. 

As I said I'm not a financial adviser but I do 'care' ( in a non- American love everyone sort of way) about my clients.


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## ClubMan

Thanks _Vanilla _- just curious. Good to see that customer care is alive and well.


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## joejoe

Is there any Irish website that I can look for that advertise repossessed houses / sites / land?

Joejoe


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## leesider29

your bank manager will be more than happy to help you out if he knows you are serious.


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## ClubMan

joejoe said:


> Is there any Irish website that I can look for that advertise repossessed houses / sites / land?
> 
> Joejoe


You haven't read _Rich Dad - Poor Dad _or similar recently by any chance?


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## eileen alana

joejoe said:


> Is there any Irish website that I can look for that advertise repossessed houses / sites / land?
> 
> Joejoe


 
Maybe you shoud wait for the boat to sink first


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## ClubMan

eileen alana said:


> Maybe you shoud wait for the boat to sink first


Huh!?


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## rmelly

joejoe said:


> Is there any Irish website that I can look for that advertise repossessed houses / sites / land?
> 
> Joejoe


 
I was under the impression that up to quite recently repossessions in Ireland totalled less than 50 per annum, so I doubt it.

Maybe it's something you could invest in...


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## Protocol

I have never seen any houses for sale in Ireland advertised as repossessions.

Has anybody?


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## joejoe

ClubMan said:


> You haven't read _Rich Dad - Poor Dad _or similar recently by any chance?


 

No I have not, why?

Joejoe


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## dewdrop

Why would a lender want to sell as " a  rrepossessed house ".  The house would be put up for sale in the normal way and eventually when the  purchaser has to sign the deed of Transfer or Conveyance he/she may notice that the vendor is a financial institution.


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## ccbkd

Repossession is going to turn into horror story soon, if we are to believe that the ECB will be make two further Interesr rate increases!


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## jimbob1234

the ECB are a load of muppets. rising rates in this kind of economic climate is madness. they will drive us into a massive recession if they keep raising. trichet says that rates at 4.25 will help fight inflation. rubbish


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## ClubMan

joejoe said:


> No I have not, why?
> 
> Joejoe


Because some people who read that and similar (_US _focused) books come away with the impression that buying property discounted through executors' sales is some sort of get rich quick scheme.


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## starlite68

a friend of mine who works for one of the big banks says she has noticed a rise in people asking to change their mortgage to "intrest only"until tings pick up.
surely that cant be smart?


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## ClubMan

As with anything there are pros and cons. For example it reduces the monthly outgoings but does mean that the capital will remain static for the interest only period thus increasing the long term cost of the loan. And one may require modified (e.g. level term) mortgage protection life assurance to cover this situation. Of course some (many?) lenders may be unwilling to switch to interest only for some (many?) owner occupiers right now. Presumably they assess such applications on a case by case basis?


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## jimbob1234

moving to interest only is a very risky move. its better than losing your home i suppose


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## ccbkd

jimbob1234 said:


> the ECB are a load of muppets. rising rates in this kind of economic climate is madness. they will drive us into a massive recession if they keep raising. trichet says that rates at 4.25 will help fight inflation. rubbish


 
Jiimbob i don't think the Irish situation reallys has any influence whatsoever on Trichets thinking remember our economy is very minor in comparison with the real big players like the Germans and French, for years the ECB interest rate was low to encourage those same economies to grow after years of slow economic development, this has worked and created the property boom in this country and helped the Germany economy to grow in line with expectation, Trichets main focus is to control this growth now and his only real choice is to increase interest rates in the EuroZone, remember by buying the ticket for single euro currency we have to take the ride and by god we are in for a bumpy one!!!


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## jimbob1234

im aware of that but with a credit crunch all over the world and growth slowing in germany etc. rates should not be risen. if he rises on thursday then oil will hit 150 , gold will hit 1000, EUR/USD will break 1.60 and then we are going to see higher inflation here again


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## ccbkd

jimbob1234 said:


> im aware of that but with a credit crunch all over the world and growth slowing in germany etc. rates should not be risen. if he rises on thursday then oil will hit 150 , gold will hit 1000, EUR/USD will break 1.60 and then we are going to see higher inflation here again


 
Not an expert on economy policy and what strategies and thinking that are adopted prior to increasing rates, surely they factor all these things in (oil, food prices etc)  prior to decision, but the over-riding factor that because common currency is still relatively new, the kind of scenario we are in at the moment is inevitable when you have a serious of member countries economies all developing at different levels, it being the case until there is unison we are always going to be a hostage to the likes of the german economy!


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## shanegl

jimbob1234 said:


> im aware of that but with a credit crunch all over the world and growth slowing in germany etc. rates should not be risen. if he rises on thursday then oil will hit 150 , gold will hit 1000, EUR/USD will break 1.60 and then we are going to see higher inflation here again


 
Oil at USD 150 and an exchange rate of 1.60 would be cheaper to eurozone buyers than it is now.

Also, the markets have priced in the rate rise with a high probability, so I don't know where you're getting 1.60 from. Sure you'ld make a killing on the currency markets with that info otherwise.


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## diarmuidc

jimbob1234 said:


> the ECB are a load of muppets. rising rates in this kind of economic climate is madness. they will drive us into a massive recession if they keep raising. trichet says that rates at 4.25 will help fight inflation. rubbish


The ECB was set up with one goal, to control inflation. It has done that job well and if inflation is now rising, it has no option but to increase rates again. Irish mortgage holders might not like it but if they did not factor a rise in interest rates to, historically relatively low values of 5%, then that was their mistake. Look elsewhere for the muppets.


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## jimbob1234

shanegl said:


> Oil at USD 150 and an exchange rate of 1.60 would be cheaper to eurozone buyers than it is now.
> 
> Also, the markets have priced in the rate rise with a high probability, so I don't know where you're getting 1.60 from. Sure you'ld make a killing on the currency markets with that info otherwise.


 
you dont know where i got 1.60 from? do you follow the foreign exchange markets, thats the euros high that was achieved during the bear sterns panic.  

diarmuid c - your point is a good one. the ECb was setup to battle inflation where as the us FED has two jobs, battle inflation and encourage growth so trichet will rise and rise again


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## shanegl

I'm wondering why you think a widely anticipated rate rise will have such an impact on exchange rates. My own belief is that its more or less priced in already.


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## shanegl

Also, inflation hits 4%: http://www.rte.ie/business/2008/0630/eurozone.html


Don't think they'll be stopping at one rise.


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## jimbob1234

how can it b fully priced in if its not definite that its going to happen yet


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## Sunny

jimbob1234 said:


> how can it b fully priced in if its not definite that its going to happen yet


 
Thats how the market works. They price in what they expect from the Central Banks. Trichet pretty much announced the rise last month and the market priced it in. Check the futures market if you want confirmation


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## jimbob1234

ill bet you that if ecb raises thursday then we will see dollar fall below 1.60


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## Humdinger

shanegl said:


> Also, inflation hits 4%: http://www.rte.ie/business/2008/0630/eurozone.html
> 
> 
> Don't think they'll be stopping at one rise.


 
Is there a chance the ECB might announce a half point increase this week rather than a couple of staggered quarter point moves.

We have been prepped for a quarter point change this month, but that was before the 4% inflation figure surfaced.


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