The idea of the negative equity mortgage for homeowners has raised its head and many lenders are planning to latch onto the controversial idea namely; Irish Nationwide, Bank of Ireland, Permanent TSB along with one or two others.
Currently if you are in negative equity it means that you cannot up sticks and sell your house. But under this new deal it would allow you take the negative equity portion of your current mortgage on to a new one when you move house.
- Supposedly it could help boost the slumped property market and provide a “lifeline” to those trapped in a location where they no longer want to live.
- If you get a negative equity and buy a new property / home it would effectively mean that you are moving with your negative equity, albeit in a new location
Some are anxious, and rightly so that negative equity mortgages could end up fuelling a new housing boom – and we certainly don’t need another one of those. However before the said banks could make such a mortgage available it would need to be approved by the Financial Regulator. Along with this the mortgage strict “Terms and Conditions” would apply and lenders insist that the controversial products will be very much niche ones and will be limited to genuine cases. – Why didn’t we apply the same rules before and during the boom?
Surprisingly negative equity mortgages are currently available in Ireland! It is a little-known fact that EBS Building Society and Ulster Bank already offer these mortgages but in a limited capacity and for selected customers who they judge can afford the repayments. “All applications are dealt with on a case-by-case basis and specific criteria apply”.
The ESRI (Economic and Social Research Institute) has estimated that the average first- and second-time buyer who bought in the last six years is on average almost €40,000 in negative equity. It will be 10 years before most first-time buyers are out of negative equity. Not only that but they also estimate that up to a third of all mortgage holders could be in negative equity by the end of this year.