So if a lot of people withdraw deposits from banks due to DIRT increases and the money doesn't find itself being used to overpay mortgages, are we likely to see the banks need recapitalized?
It's a pity the government couldn't conjure up some sort of CAT holiday in the following circumstances:
I know that, in most cases, it would be the child helping the parent. However, in my position, the opposite would be a possibility.
My parents have residential and commercial property attracting an interest rate of 6% and currently on an interest only basis (through necessity as rent doesn't even cover the interest).
For simplicity sake, lets say this loan is valued at €300,000, giving an interest-only cost of €18,000 per year. The property is in negative equity and my parents are 20 years from retirement, meaning it hasn't been possible to move to standard BTL rates.
My house has sufficient equity that I could release €100,000 and pay 3.85%. This would be a good move given the rate difference that my parents are paying. However, the fact that I'd have to pay CAT would significantly reduce this, making it a no-go.
If I were able to give the entire €100,000, free from CAT, their loan would reduce to €200,000. This would bring their portfolio out of negative equity, give them access to BTL rates (if the bank agreed which, given their reduction in risk, I'd say's a given) and allow them to go on a repayment basis over 20 years at a 9.5% lower monthly repayment than they are currently on.
Their own home mortgage has already been restructured and is also interest only so the bank probably already see them, potentially, as a lost cause.
It's a pity the government couldn't conjure up some sort of CAT holiday in the following circumstances:
- Child (or parent) is in excessive debt, to the extent that bank intervention to restructure the loan is required;
- Parent (or child) is in a position to help out, through remortgaging their home, liquidating investments or withdrawing cash deposits
I know that, in most cases, it would be the child helping the parent. However, in my position, the opposite would be a possibility.
My parents have residential and commercial property attracting an interest rate of 6% and currently on an interest only basis (through necessity as rent doesn't even cover the interest).
For simplicity sake, lets say this loan is valued at €300,000, giving an interest-only cost of €18,000 per year. The property is in negative equity and my parents are 20 years from retirement, meaning it hasn't been possible to move to standard BTL rates.
My house has sufficient equity that I could release €100,000 and pay 3.85%. This would be a good move given the rate difference that my parents are paying. However, the fact that I'd have to pay CAT would significantly reduce this, making it a no-go.
If I were able to give the entire €100,000, free from CAT, their loan would reduce to €200,000. This would bring their portfolio out of negative equity, give them access to BTL rates (if the bank agreed which, given their reduction in risk, I'd say's a given) and allow them to go on a repayment basis over 20 years at a 9.5% lower monthly repayment than they are currently on.
Their own home mortgage has already been restructured and is also interest only so the bank probably already see them, potentially, as a lost cause.
