P.I.G.S.

Flagship uberalles said:
I would have thought Christian mercy had very little to do with it - if the rates of foreclosures / repossessions continue to rise, surely this serves to further devalue housing prices meaning the repossessed assets are worth less?
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exactly, no point the Banks owning a load of worthless property.

I believe in Germany Mortgage interest rates are set for the duration of the Mortage . In Japan they have 100 year mortgages. Anyone know if this is true and why wouldn't it work here ?
 
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On the receiving end, I think you'd be calling it Christian Mercy indeed!
Not on the giving end, I agree, very unlikely.

How's that? Profit protection flows under the bridge and flows into Christian Mercy.

There's irony. Or maybe JC had that covered somewhere, too. :)
 
As I see it there are many things wrong with multi generational mortgages, which is what a 100 year mortgage would be. The primary one is that it would end the long standing idea that debt is extinguished at the death of the borrower, where it dies with the borrower's estate. If the borrower dies insolvent, that is tough shit on the lender. If the borrower has life insurance, that's fine, the lender gets paid and the estate gets the asset. But intergenerational debt is an attempt to enshrine the idea that you can bequeath debts.

I have never heard of it anywhere other than in Japan, where it was the only way in which people could afford homes back in the 80's.

Why would you propose that they be introduced?
 
Dreadful idea. Who would want it? Repayments per month wouldnt be that much less anyway given that the bulk is always the interest

I think if anyone is trying to come up with alternatives to the current options, they are going to have to think a lot harder than that and it has no relevance to overxtending borrowing or negative equity anyway


Im all for free markets (who isnt..command economies are only supported by the mentally ill), but housing is a precious commodity with emotional inveetment. There is no way you can or should regulate the price market but one area where I believe a suppression of demand would not have been a bad thing was second homes and buy to lets (im talking UK here). might not have been the worst policy by any administration to have hammered stamp duty on such properties.


of course there would be all the llopholes (Limited company ownership, trustrs etc) but potentially they could have been closed.

efforts to restrict lending by controls or rate rises affect everyone
 
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As Clive alludes to, the repayment per month on a €200k 100 year mortgage is not much less than the payment on a 50 year mortgage. Assumes 5% rate:

20y €1,320
25y €1,169
30y €1,073
40y €964
50y €908
60y €877
80y €849
100y €839
 
I'm trying to think of ways that people can keep their homes and the Banks get some cash instead of a load of worthless property . Sure, it's kicking the problem down the road but it would give some stability. With no hope of paying a mortage off people are throwing the towel in. If the amount was greatly lessened people would find a way. As for the Banks, some cash is better than none. When (:cool:) things pick up people have the option of increasing their payments and lessening the duration of the loan without a penalty.

I think fixed interest rates for the duration of a mortgage would be a huge help to people planning ahead and must be introduced in law too.
 
Bar the Bull said:
As Clive alludes to, the repayment per month on a €200k 100 year mortgage is not much less than the payment on a 50 year mortgage. Assumes 5% rate:

20y €1,320
25y €1,169
30y €1,073
40y €964
50y €908
60y €877
80y €849
100y €839
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Is the Bank obliged to push out a 20yr mortgage to a 50yr if requested ?
 
Sheikh said:
I'm trying to think of ways that people can keep their homes and the Banks get some cash instead of a load of worthless property . Sure, it's kicking the problem down the road but it would give some stability. With no hope of paying a mortage off people are throwing the towel in. If the amount was greatly lessened people would find a way. As for the Banks, some cash is better than none. When (:cool:) things pick up people have the option of increasing their payments and lessening the duration of the loan without a penalty.

I think fixed interest rates for the duration of a mortgage would be a huge help to people planning ahead and must be introduced in law too.
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But the amount that people pay would not significantly reduce, as I have shown.

Banks are already allowing people to go interest only. If they do this, it wouldn't matter what term the mortgage is.
 
So it's never ending for those who are in negative equity? It makes you wonder what people were thinking getting a mortgage in the first place.
 
Sheikh said:
Is the Bank obliged to push out a 20yr mortgage to a 50yr if requested ?
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No it isn't. I don't think that would be a good idea.

Gearoid said:
So it's never ending for those who are in negative equity? It makes you wonder what people were thinking getting a mortgage in the first place.
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It is never ending. It was collective insanity, like tulip mania in Holland in the 17th century.
 
I think fixed interest rates for the duration of a mortgage would be a huge help to people planning ahead and must be introduced in law too.
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Not a chance. Absolute economic illiteracy here. No bank is going to commit itself to rates 20 years down the road. If there was some stupid left driven statist intervention to do so, you can guarantee that the banks would gang uop and hedge with tough rates. and rightly so. Why should they find themselves forced to maintain a full book iof loans that are potentially worthless once general rates rise?

it works both ways. If i had been forced to take such a loan 25 years ago, i would be paying 12% or something now
 
Property markets on the continent don't seem to be subject to the same swings as in the UK and Ireland.

One of the reasons, I think, is that rents are controlled to an extent and there are heavy transaction costs when buying and selling houses.

Apart from a relatively small social housing sector, there is a free market in rental property. Landlord and tenant agree a rent at the going rate, but after that it is adusted each year using a cost of living index. Because rents are relatively stable, so too are house prices. Landlords can still make a useful income from their properties, but the get rich quick merchants looking for big capital gains are not attracted. The other advantage is that tenants don't feel pushed into buying, which was another source of demand during the bubble in Ireland.

The other measure which discourages property speculation is the very high cost of buying and selling. Here in Belgium you have to budget about 20% more than the nominal purchase price of the house for federal and regional taxes and professional fees.
 
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And the disadvantages are that the market for property is closed to all but the relatively cash rich and that the opportunity to have a valuable asset as well as live without any further housing costs in your later life is heavily restricted

in other words the contintental system is a pile of crap

What is also often forgotten is that ownership of property is a strong asset and base for starting an enterprise. The wider property ownership is extended, the larger the pool and opportunity for business start ups. That is only good for the long term health of the economy. It is also very much the british way (and irish probably). Whilst i am pro EU, I do recognise that this country is not like much of old europe and culturally is far more geared towards trading and creative enterprises which tend towards smaller groupings and higher risk enterprise

Was interesting when i had around 40 finance people reporting into me worldwide it was interesting to observe. The contintentals were reasonably friendly and co-operative but pretty inflexible and always gone by 5. The americans were slavishly subservient to the great head office and very friendly and always willing to help. Far east much the same

The british were a nightmare. Group co could fuck off and wait and whatever we told them, they would do the exact opposite

Exaggerating a bit, but it wasnt far off being a rule of thumb
 
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No it isn't. I don't think that would be a good idea.
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There's the bones of €500 a month difference with the example you gave between 20 yr and 100 yr mortgage repayment. Seeing as the Banks are pretty much owned by the Tax payer anyway they should be obliged to offer set interest rates and 100 year mortages. I like the idea of people being able to rent their property too.
 
Gearoid said:
So it's never ending for those who are in negative equity? It makes you wonder what people were thinking getting a mortgage in the first place.
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Negative equity is only relevant if your selling your property.
Ever heard the one about rent money being dead money.
 
I dont know why interest rates are part of the discussion here. They are at historic lows. If someone is unable to pay the mortgage because of current rates, then they have clearly either had a substantial drop in income or dived into speculation in the rental market. the first elicits sympathy but could happen at any time in an economic cycle and would be much the same (if not worse) if in the rental market

Someone whos bought in last few years will almost certainly not be paying more per month than when first taking on the loan.
 
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Sheikh said:
Negative equity is only relevant if your selling your property.
Ever heard the one about rent money being dead money.
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Sheikh, you haven't addressed my concerns about 100yr mortgages. They are actually close to renting, as assuming you buy at 28, by the end of your working life, you will have paid off very little principal.

The one about rent being dead money is complete horseshit. It got us into this mess.

If renting is dead money, why are you renting money from the bank to buy a house?

Buying an overpriced asset is dead money.

Stamp duty is dead money.

Why would rent be dead money if it costs me less than half of what it costs to pay a mortgage on the same property?
 
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clivex said:
Also you cited Belgium as a steadier market

http://www.globalpropertyguide.com/Europe/Belgium/price-change-10-years
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That's an interesting site, hadn't come across it before. Market pressures do win through, as I implied they would in the longer term, but if you check out the separate analyses on the site for each country, you will see that in most years the market jumps around more in the UK than Belgium.


Err... France Germany and Netherlands well below..

Thats a big chunk of europe
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The UK is mid-table. There are countries above it with a system similar to the one I have been describing.
 
clivex said:
Not a chance. Absolute economic illiteracy here. No bank is going to commit itself to rates 20 years down the road. If there was some stupid left driven statist intervention to do so, you can guarantee that the banks would gang uop and hedge with tough rates. and rightly so. Why should they find themselves forced to maintain a full book iof loans that are potentially worthless once general rates rise?

it works both ways. If i had been forced to take such a loan 25 years ago, i would be paying 12% or something now
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This isn't true. Banks would commit to rates 20 years down the road. They would just hedge the fixed part of the deal with a 20yr interest rate swap.

Incidentally, a 20yr fixed rate mortgage would likely be priced at 6.5% or so.

Not many people would go for that when current variable rate is typically 3.5%.

The problem with Irish mortgages was not the interest rate. If people had been offered 20yr fixed rates back in 2006, they would have been rightly fucked. Trackers were a blessing for customers.
 
I'm finding some advantages to renting (even if I eventually go back to buying - and my buying was always cash only): no buildings insurance, no buildings maintenance, no cost of repairs of owner-installed equipment, plumbing or electrical problems. If tiles fly off the roof - not my problem. If the pipes get clogged - not my problem. Property has to be maintained and presented to H&S standards or else the owner faces prosecution. In two years' time, there'll be a brand-new kitchen installed - none of it my cost. If I have, say, £200,000 for a flat, I can rent for a helluva lot longer and accordingly adapt to any changing circumstances (and, if I were still working f/t, that could mean reacting within 4 weeks to a promotional transfer instead of hoping to God my flat sold in 4 months) - with £200K I may well have to bang down a large initial wedge of that and then pay all my costs of renovations, insurance and repairs. I used to think that 'rent money is dead money' but it really isn't - it's just another option as to how to use your dosh. In my case, I will want my capital from the sale of my flat to do something other than buy another place right away. Renting gives you more flexibility on many levels.
 
krizon said:
I'm finding some advantages to renting (even if I eventually go back to buying - and my buying was always cash only): no buildings insurance, no buildings maintenance, no cost of repairs of owner-installed equipment, plumbing or electrical problems.
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Good points. I recently received a letter from the developers of my flat reminding me that I haven't paid ground rent in three years. £300 they want:(
 
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