Negative Equity - Fixed rate ends in March. what to do?

P

philcheetham

Registered User
Messages
27
Hi there. Lots of information about negative equity etc. I wanted to put my situation out there in the hope someone could help / advise what to do:


We bought our property in 2007. We took out a 100% mortgage for 385,000 euro. We took our mortgage out with Ulster bank, on a fixed rate of 5.25%. We are in negative equity, and i would guess (not 100% sure) that the property would now be worth 340 / 350? i think this because our property was advertised initially at 425,000 euro before we bought at our price.

My question is, obviously we are in negative equity. When our Fixed rate mortgage agreement comes to an end in March, what would people do? What would you advise we do? Are we able to change providers of our mortgage? If so, who would you use? What should we do in terms of fixed / variable?


Thank you.
 
Hi Phil

You cannot do anything between now and March, so don't make complicated plans. House prices may rise or fall, although I am not sure that is very relevant to the case. Interest rates may rise. Your income may rise or fall. Ask the question again in March when you know the situation.

If your mortgage repayments are a high proportion of your income, you should look at ways of adjusting your spending to see if you can save a bit more. That is about all you can do now.
 
I think it would be reasonable to assume that you will not be in a position to change mortgage providers due to negative equity and as Brendan says leave matters rest till near expiry of the fixed term.
 
Well, interest rates were significantly higher in 2007 than they are now, so your repayments should actually fall when you come off the fixed rate. Whilst we cannot predict what interest rates will be in 2010, the standard variable rate at UB (which it is likely you will revert to) is currently 4% which is 1.25% less than you are presently paying. Nearer the time you will have to re-examine the situation and carefully consider the rates at Ulster Bank and decide which is the best option for you.

I don't mean to sound too pessimistic here but I think you are either, in the most resilient property, in terms of price, in the whole country or you are in far worse negative equity than you think. Even the very conservative PTSB House Price Index has prices down from the peak at 24.4%, but in reality drops are much nearer 40%++. But even taking 24.4% it would have your property at 320k (assuming €425k price eventhough you didn't pay that) or 290k (at the actual price paid by you). So switching mortgage providers will not be an option for you in the short term.
 
One proactive step you can do is save as much as you can to throw at the capital amount when the fixed rate ends.
 
You must log in or register to reply here.
Back
Top