Greece Watch...

[emordnilap]

Not that I disagree with your point but "thousands in arrears" doesn't tell me much. What is the historic norm for the percentage of mortgages that go bad and how does the current rate compare?

14.5% of household mortgages are in arrears in Ireland as of today. I can't find the historical norm at the moment but 1 in every 7 houses being in arrears (after all the repossessions of the past few years) sounds awful high.

We also have to remember all the people whose majority of household income is going towards ridiculous debts (but fortunately are not in arrears). A friend of mine pays - and has being paying for ten years now - a mortgage of €1,700 per month. All the people in his estate will be paying roughly the same, it was a new estate when he bought the house. That's not far off our personal income in total. There must be hundreds of thousands handing over such sums to banks.

This is not just 'negative equity'. This is criminal profiteering as you end up paying double the asking price over the course of a mortgage.

During the so-called 'good times', the price of property became risible but banks gave 100% - and sometimes more - mortgages. These properties are simply not worth such sums. The cost of materials barely rose, yet a house costing no more than €50,000 in materials would be priced almost a third of a million.

Today some people are able to buy the same properties for what they're actually worth: €80,000. Their high-mortgage neighbours must be seething at being had like this. What an imbecilic system. Some people will thus end up paying €700,000 for an €80,000 property.

[emordnilap]

Here's an interesting article from Ellen Brown.

The noose around Greece’s neck is this: the ECB will not accept Greek bonds as collateral for the central bank liquidity all banks need, until the new Syriza government accepts the very stringent austerity program imposed by the troika (the EU Commission, ECB and IMF). That means selling off public assets (including ports, airports, electric and petroleum companies), slashing salaries and pensions, drastically increasing taxes and dismantling social services, while creating special funds to save the banking system.

And that's how they threatened Ireland, which capitulated.

How to escape the tentacles of this toxic squid-like banking hierarchy?

For countries with a bit more room to maneuver than Greece has, one option is to withdraw public and private deposits and put them in publicly-owned banks. The megabanks are deemed too big to fail only because the people’s money is tied up in them. They could be allowed to fail if public funds were not at risk.

This is a perfect idea. The Greeks should do this and fúck the euro. Short-term pain, long-term gain.

[vtsnowedin]

This is not just 'negative equity'. This is criminal profiteering as you end up paying double the asking price over the course of a mortgage.

Has this not always been the case with any thirty year mortgage at interest? Do they not teach this basic math and set of rules in your schools?

During the so-called 'good times', the price of property became risible but banks gave 100% - and sometimes more - mortgages. These properties are simply not worth such sums. The cost of materials barely rose, yet a house costing no more than €50,000 in materials would be priced almost a third of a million.

Today some people are able to buy the same properties for what they're actually worth: €80,000.

Yes you are right in that, and it was an ill advised decision to buy at those inflated prices and perhaps criminally negligent for the banks and government regulators to approve and make such stupid loans.
As to defalt rates I believe post WW2 one to two percent has been the norm in the US market but there have been relatively few down turns of any extended duration during that period. If you could find figures for the entire 20th century I suspect it would be higher but doubt it would be 14 percent.

[emordnilap]

This is not just 'negative equity'. This is criminal profiteering as you end up paying double the asking price over the course of a mortgage.

Has this not always been the case with any thirty year mortgage at interest? Do they not teach this basic math and set of rules in your schools?

Actually, no but that avoids the point - that people who are 'lucky' (!) to have the ability to stay the course will end up paying 10 times what their home is actually worth and there is no way around this.

[biffvernon]

We need a law that forces mortgage providers to wear a striped shirt and eye-mask and carry a large sack clearly labelled 'swag'. Then folk would be suitably warned.

[PS_RalphW]

I bought my first house on a 20 year mortgage with an interest rate of 15.6%
(variable). At the time, 25 years was the recommended repayment period.

Needless to say I planned on overpaying as rapidly as possible to keep the total debt to a minimum. I did work out the total cost if rates had stayed that high, it was a lot more than 3 times the initial loan.

Rates fell to about 6% in the next few years, and I paid the whole debt off in 6 years (could have done it sooner) by not reducing the monthly payments as the rate fell.

I lost a lot of money on the

1. 35% fall in the value of the house by the time I sold it.
2. The 'endowment' policy I was bullied into taking out which returned less than the money I put in, 12 years later.
3. The PPI insurance I was forced to take out even though I was ineligible for the insurance payout conditions

However, I would have lost a lot more money if I hadn't paid off the mortgage when I did, or if I had continued to rent rather than buy.

Edit,

Over 25 years at 15% I would have paid £4 in interest for each £1 of the loan, making the total cost of £45,000 house £225,000. And then the endowment policy would not have reached the original loan value, costing me another £10,000 or £20,000.

[Tarrel]

Today some people are able to buy the same properties for what they're actually worth: €80,000. Their high-mortgage neighbours must be seething at being had like this. What an imbecilic system. Some people will thus end up paying €700,000 for an €80,000 property.

Such is the nature of bubbles, sadly. I've no doubt there will also be people seething who bought shares at the top of the market, when they see others buying those same shares, yielding the same dividend, for half the price when the "correction" comes.

But yes, the real problem is not so much the number of people in arrears but the many more sitting on ticking time-bombs that will blow up once interest rates rise by even a small amount. Worth remembering that interest rates have typically sat at around 5% before the current silliness. That's TEN TIMES the current base rate!

Someone taking out a £200,000 mortgage today and paying interest at 2% would be paying £848 per month, and a total repayment of £255,000 over 25 years. If the rate increased to 6%, they'd be paying £1289 per month (£441 more, or over 50%) and they'd pay a total of £387,000 over the 25 year period!

It's a disaster waiting to happen and the problem is being driven by the ridiculous amounts people are being asked to borrow in relation to their income.

The really sad thing is that people are pouring huge amounts of money into what is essentially a non-productive asset. Maybe it's time to start thinking outside the box about how one's shelter requirements can be met.

Like this, for example...

http://www.dailymail.co.uk/news/article ... years.html

For most of us who visit a Travelodge, it is a fleeting pleasure. Park the car, go to bed and get away as early as possible in the morning.

But for David and Jean Davidson, it is home.
They arrived in 1985, and enjoyed it so much that they never left.

Mrs Davidson, 70, who is wheelchair-bound, said yesterday: "I really like living here - it's so convenient. Our room is on the ground floor so there are no stairs or lifts to deal with.
"We don't get hit with huge heating bills over the winter and it's safer than a lot of places these days.
"It's also great to be based so centrally to Grantham, Newark and Lincoln.
"We like going for day trips or having lunch at local hotels as well as eating at the Little Chef on site.
"For us it's a better and cheaper option than an old people's home and we're well looked after."

[emordnilap]

Yeah, I left out the interest rate bomb. It is on its way, be with you shortly...

[vtsnowedin]

Yeah, I left out the interest rate bomb. It is on its way, be with you shortly...

Are there no fixed rate mortgages available? Again do they not teach people the difference?
And is all this interest fixed or variable) tax deductible? That makes a world of difference to the net cost of housing.

[3rdRock]

Greek bailout crisis: Athens threatens to seize German assets 'as compensation for Nazi war crimes'

http://www.independent.co.uk/news/world ... 01329.html

Ach mein Gott!

[Tarrel]

Are there no fixed rate mortgages available? Again do they not teach people the difference?

Yes, but typically only for 2-3 years. In an environment of increasing interest rates, all this does is create a sudden big step up along the road, rather than a gradual climb. There's no such thing here as a mortgage with the interest rate fixed for the full term of the loan, as would be the case, say, with a short term bank loan.

And is all this interest fixed or variable) tax deductible? That makes a world of difference to the net cost of housing.

No. Used to be a few decades ago, but not anymore. The exception is a commercial mortgage (on, say, a shop) in which case the interest payments are deductible against tax.

[vtsnowedin]

Are there no fixed rate mortgages available? Again do they not teach people the difference?

Yes, but typically only for 2-3 years. In an environment of increasing interest rates, all this does is create a sudden big step up along the road, rather than a gradual climb. There's no such thing here as a mortgage with the interest rate fixed for the full term of the loan, as would be the case, say, with a short term bank loan.

And is all this interest fixed or variable) tax deductible? That makes a world of difference to the net cost of housing.

No. Used to be a few decades ago, but not anymore. The exception is a commercial mortgage (on, say, a shop) in which case the interest payments are deductible against tax.

Just shows you how different it is from one side of the pond to the other. No thirty year fixed and not tax deductible interest? Why dose anybody in the UK ever buy except for cash?

[kenneal - lagger]

Why dose anybody in the UK ever buy except for cash?

Because, with our rigged housing shortage and overpaid, overbonused *ankers buying up a lot of what is build, it's still cheaper than renting.

[emordnilap]

Just shows you how different it is from one side of the pond to the other. No thirty year fixed and not tax deductible interest? Why dose anybody in the UK ever buy except for cash?

Interesting. So if rates are high, are you stuck with them for 30 years? And, with interest rates being so variable over thirty years, no bank over here would touch them unless it kicked off at, I dunno, 10%.

There were 'tracker' mortgages which the banks loved: mortgagees would pay a tiny fraction above the base rate and follow that base rate up and down. But now interest rates are so low, the banks hate them.

50% of sales in Dublin are now for cash.

[vtsnowedin]

Just shows you how different it is from one side of the pond to the other. No thirty year fixed and not tax deductible interest? Why dose anybody in the UK ever buy except for cash?

Interesting. So if rates are high, are you stuck with them for 30 years? And, with interest rates being so variable over thirty years, no bank over here would touch them unless it kicked off at, I dunno, 10%.

There were 'tracker' mortgages which the banks loved: mortgagees would pay a tiny fraction above the base rate and follow that base rate up and down. But now interest rates are so low, the banks hate them.

50% of sales in Dublin are now for cash.

No you are not stuck with a high rate. When the difference is large enough you refinance sometimes even with the same bank. Of course there are closing cost for the paper work so you wouldn't refinance for a couple of points but over the last few years with the Zero Fed rate and 4% fixed available anybody solvent has got rid of anything above 6%.