Allow people in negative equity swap with people with equity

[Brendan Burgess]

Well it was my post that initiated this and my main point is not negative equity.

OK

But this is what you said in your original post:

For every person with a €1m mortgage on a house worth €600k who cannot pay the mortgage, there's probably someone else with a low mortgage on a €400k house who would gladly come up with €200k to trade up.

You talk about someone with positive equity swapping a house with someone in negative equity.

So, if you meant to say that "For every person with a €600k house who wants to trade down, there is someone with a €400k house who wants to trade up".

I would agree that stamp duty needs to be reduced (abolished?) to allow such trades to be done on the basis of need, rather than limited because of stamp duty.

However, if the person who has a €600k house, has a €1m mortgage, then they will not be able to swap and even if they could, they are in such trouble that their best chance of escaping is hoping that house prices might rise. They are in such trouble, that it probably does not matter too much to them if house prices fall. Once you are bankrupt, you are bankrupt.

Brendan

 

[DerKaiser]

However, if the person who has a €600k house, has a €1m mortgage, then they will not be able to swap and even if they could, they are in such trouble that their best chance of escaping is hoping that house prices might rise. They are in such trouble, that it probably does not matter too much to them if house prices fall. Once you are bankrupt, you are bankrupt

If I earned €120k per annum, I would have a disposable income of about €70k.

If we assume a 30 year term on the €1m mortgage at 4% it will cost me about €60k p.a. to pay off. This would leave me in a very tight situation, probably bankrupt if interest rates start to rise.

If the bank let me move to a house worth €300k less and enabled me to reduce my debt by €300k, my annual mortgage would fall by almost €20k.

This would mean that I have move from being effectively bankrupt to a much more comfortable situation.