trade up negative equity mortgages to be allowed

44brendan said:
I can't see thi scheme as having any effect on the market. it would only apply to a minority of borrowers.
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I would be one of the minority that this type of product would be marketed to, and it is a relief to have it as an option. We have a 1-bed apartment and it is not suitable for us in the longterm. While I am desperate to move I will be doing it with my eyes wideopen this time around - I won't be queueing at the bank or estate agent in the immediate future but it is good to have this type of mortgage as an option (where it is affordable of course).
 
Leaky1 said:
I would be one of the minority that this type of product would be marketed to, and it is a relief to have it as an option. ).
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Well at least someone is happy, the amount of whining about losing their tracker mortgages and that it's unfair of the banks and only the banks gain that has been on the radio about has been unbelievable.

Firstly it is a new option, an option that's all, available to very few, and where it makes sense it will hopefully help those people and so what if they lose their trackers. Add up the figures and if it make sense be glad one has actually been given an option.
 
Matthew Elderfield has spoken on the topic [broken link removed]

Mr Elderfield said while negative equity mortgages posed consumer protection issues, because they involve borrowers taking on increased debt, the Central Bank had decided to make it easier for financial institutions to offer them.


He said in light of the limited take up of negative equity mortgages so far, and because of the potential benefits for facilitating moves and generating transactions in the housing market, the Central Bank has decided to "adapt its approach to make provision of negative equity mortgages easier".


"We will not set prescriptive standards in these areas but will look to see that lenders are taking a reasonable and controlled approach," he said.
Mr Elderfield added any such negative equity mortgage agreements would also have to comply with the affordability and suitability provisions set out in the Consumer Protection Code.
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NE mortgages

Have these been available since middle 2011?


Last month, Bank of Ireland and Permanent TSB confirmed it had been given permission by the Central Bank to offer negative equity mortgages in limited circumstances since the middle of 2011.
 
I understand that they are available on a very limited basis to select clients. They will not be advertised or promoted.

Brendan
 
JMJR said:
Have these been available since middle 2011?


Last month, Bank of Ireland and Permanent TSB confirmed it had been given permission by the Central Bank to offer negative equity mortgages in limited circumstances since the middle of 2011.
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I think the point is that, since mid 2011, they have been allowed give them in "limited circumstances". Central bank had set strict rules on it. Elderfield is now saying that they won't set any rules, but will monitor the banks to make sure they aren't being irresponsible. "We will not set prescriptive standards in these areas." He said it would be good for the housing market to allow some more activity.

Negative equity mortgages, despite what some opponents say, make perfect sense for some people, provided their new loan repayment passes strict stress tests.

Remember, 40% of the country already have negative equity mortgages. All this will do is allow some of them flip that NE from one address to another. They will no longer be prisoners in homes that are unsuitable.

"Rent your house out and move to one that is more suitable" is the usual refrain of opponents to NE mortgages. This is just plain bad advice on so many levels:

- You are forcing people to become professional landlords when they don't want to be.

- People are fleeing the buy-to-let market because they are losing money hand over fist. Forcing people to enter this market, unwillingly, seems to me to be much, much riskier than a NE mortgage.

- People will probably be in breacxh of the PPR clauses in their mortgages. They may lose their trackers because they rent their places out.

- They will become liable for tax on their rental income.

- What happens if their tenant moves out? Straight away they will have to pay their rent and their full mortgage......
 
As a FOOL who never took up a tracker mortgage and went with an SVR, these changes sound like a potential lifeline. If our bank were to allow this, and provided they didnt just stick a couple of extra percent onto the SVR for us, then in theory there would be no change to the affordability of our debt. Is that correct? This is a nice option to give us some hope for the future.

I say future because 25% of the NE being carried over is still nowhere near enough for us, sadly.
 
The Irish Times has an editorial [broken link removed]

This is not to say that government action to bolster the property market – either directly or via a loosening in regulatory constraints on financial institutions, as in this case – should be treated lightly. The national obsession with property was a factor, if not the main factor, in the frenzied credit expansion that ultimately led to this State’s worst ever recession. But a stable, well- functioning property market is essential. Tightly controlled negative equity mortgages can be a small but significant part of achieving that objective.
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It's odd that none of those who support them seem to compare trading up from one negative equity loan to a larger negative equity loan with renting.

Brendan
 
The laws around the rental market here are inadequate to meet the needs of many families who need a certain amount of stability, which current laws don't offer. There is no security of tenure here beyond 4 years (kids spend 14 years in school). So what happens after 4 years? Does the family move out, and hope they get another rental property in their kids' school district? Also, the landlord can throw them out at ANY time if they want to sell the property or move back in themselves.

Also, renting as an alternative solution to a negative equity mortgage, for some people, can be a higher risk financially. What if your tenant moves out, and you have to cover both rent and mortgage? What happens your mortgage rate now that you have become an "investor"? Tax becomes due on rental income, etc etc......

It just looks to me like the Irish Times, and Elderfield, have seen a certain amount of sense on the issue.
 
Brendan-

Perhaps I'm missing the point, so can you comment on Wipetheslate's post? If I have a SVR NE mortgage right now which I am am servicing and I can fund the costs of moving (legal, stamp, etc.) from one house worth €100k to another worth €100k - why not allow the move? Neither the bank nor I are in any worse position for it and I can relocate for personal/work/whatever reason?
 
Wipetheslate said:
I think its a positive step and shows somebody in the banks are trying some outside of the box ideas , with some tweaking I think it would suit some people .

Say If I bought a house for 300k with 100% mortgage during the bubble ,which would fetch only 100k in the current market
I see a house I like ,and would want to settle in, and its on the market for 100k now.
So I apply to the bank for a 100k mortgage for the new house and they "port" 200k negitive equity from the old mortgage to the new one.

After my circumstances have been stressed tested for the ability to service the new payments on 300k on SVR I've moved from a house I hate to a house I love .
Bank has a happy customer and performing mortgage.
Customer is happy in new house and able to pay mortgage.

At the start I had a 300k mortgage on a house I hated ,worth 100k
At the end I have a 300k mortgage on a house I love , worth 100k

Only penalty being the difference between my old tracker and new SVR interest rate,A price some would be happy to pay IMO.

Does the Customer have to apply for a mortgage for the 100k purchase price or would the figure be 300k (purchase price & negetive equity ) ?
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In this instance the new mortgage approved would need to be 300K. I.e. I can't see any Bank agreeing to this option where a client/s cannot fully service the original mortgage.
 
44brendan said:
In this instance the new mortgage approved would need to be 300K. I.e. I can't see any Bank agreeing to this option where a client/s cannot fully service the original mortgage.
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But where they can service the original mortgage (e.g. they are selling and buying again for reasons other than affordability), should they approve it? And would they?

IMO, they should as there is no substantial change.
 
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looking at this proposal from the perspective of the Bank's I would see the issues as follows:
- Do the clients have a satisfactory repayment track record & no imminent change in their financial circumstances? If so then they should be afforded an opportunity to move home as negative equity will not undermine the Bank position.
- Bank should also be prepared to leave tracker mortgage element of existing facility unchanged.
- If they have capacity to take on a higher loan, this element would be approved at current SVR.
The difficulties in getting such a process "past the post" is that unfortunately most Banks are now caught up in the moment in terms of risk assessment. I.e. who would be first to put this in front of Senior Bank Management? It needs a Government drive before it has any chance of success.
 
44brendan said:
they should be afforded an opportunity to move home as negative equity will not undermine the Bank position
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I concur and believe where the loan (or perhaps the repayment) amount and term do not increase there should be full portability of NE. I get the impression that others think otherwise and wonder if I'm missing something.
 
I went to BOI wanting to carry over neg equity and you are right they would only let me carry over 125% which meant that in order to fit those figures I would have to borrow MORE to make it work! Makes no sense to me whatsoever. I explained that my current LTV is approx 163% - I proposed to purchase a house for 200,000 after selling my own and put down the 8% deposit. This then would bring my LTV to about 134% - - THEY WOULD NOT ALLOW IT???? My proposal to bring my LTV from 163% to 134% and come off my tracker was refused! Literally makes no sense at all. I could of course borrow MORE to close the gap to 125% - Have you ever heard such rubbish in all your life. It's so very tiring working with the bank and the excuse for what they call professionals running it!



Only problem I would have would be if I lost my tracker mort and thats probably a definate. saying that we are carrying about 45% in neq eq at the moment and I read somewhere that they would only allow you carry 25% max with you....:([/QUOTE]
 
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