Getting economy back on track and avoiding mass defaults is a difficult task to juggle

Getting economy back on track and avoiding mass defaults is a difficult task to juggle

In last week’s Friday Feedback we discussed the possible impact of the property tax and Budget on people’s finances going into 2013.

As part of that article we took a brief straw poll from people to get an idea of how they would be impacted by any additional charges come December.

We asked would people be able to afford an extra €50 in bills a month and, somewhat worryingly, just 28% said they would be able to. Almost half (47%) said they simply couldn’t while 25% said they would barely be able to cope with an additional €50 going out the door.

We also asked how much money people had for themselves each month after essential bills are paid.

While 24% said they had €500 or more, it was worrying that the next highest tally of 19% was by people who said they had less than €50 per month to spend after bills are paid.

In fact, 58% of people said they had less than €200 to spend a month after paying their bills.

With all that in mind, it is no wonder that figures have emerged today that says the economy is at best flat, if not even contracting slightly.

It is the ordinary worker who drives the economy with purchases of things like clothes, music, hotel stays etc. When they don’t have the cash to do that though industries such as retail suffer and, in turn, so does the economy.

It appears inevitable though that come next year, the little people have to spend at present will be reduced even further.

Moody’s released a worrying report yesterday in which they said that the mortgage crisis will peak next year with one in five home loans defaulting.

They insist the only way out of the crisis will be debt write-offs.

Whether that happens or not remains to be seen but it was interesting to note that, to date, Cork and Dublin – two of the largest population areas in the country – have the lowest default rates in Ireland.

That would suggest that, by and large, the real mortgage arrears crisis has yet to hit the cities but if and when it does there could be major problems on the horizon.

The report by Moody’s said that those who bought in 2006, 2007 and 2008 were most likely to default – no surprise as it is these people who are in the most financial difficulty.

New personal insolvency legislation next year might help but before all then their limited resources will be tested even further by property taxes and any other taxes, charges or cutbacks that come in December’s Budget.

With all that in mind we’d like to hear your opinion on how you would sort the issue out – to relieve the pressure on those struggling, while also trying to get the economy back on track.

Should exemptions be part and parcel of the new tax or would that be unfair on those who are meeting their mortgage repayments each month, negative equity or not?

Let us know your opinion below…

There are 14 comments for this article
  1. Paul Browne at 3:31 pm

    @ Paddy. You bought your home for a reasonable price which didn’t drastically devalue NOR did you get affected by Neg EQ. If you have as you say ‘other financial difficulties Mortgage or no Mortgage’, then who’s fualt is that? My only debt is Neg Eq. Outside of that i spend what i earn and nothing else. No investments/gambling for this generation……

  2. Andrew at 3:48 pm

    Like Paddy Purell I bought in the early 80’s within 18 months the houses around me were being sold very slowly at 50% of the original price.

    That meant I was in serious negative equity although we didn’t have such fancy terms for it back then.

    Like Paddy I was more concerned at meeting the mortgage payments on my home every month, some of us paid in excess of the 16 > 17% mentioned by Paddy.

    It took into the late 1990’s before I could even break even, what was more important to me was I had a home not like today I didn’t see it as an investment.

    All anyone has to do is add a few zeros to our buying prices and mortgage payments, also remove a few zeros from our incomes and we were in exactly the same position as the negative equity people today.

    By all means “Park” the amounts the people can’t pay today and they can review it in the future.

    Time to grow up and accept that all property prices do fall as well as rise, not pleasent but true.

    When that happens maybe we can start to deal with the real issues like finding potential leaders who have some integrity.

  3. Paddy Purell at 4:12 pm

    Maybe I shouldn’t be allowed in here because I bought my house in 1979 went through 12 years of hardship paying off my mortgage at 16/17% before the rate came down in the 90’s but I got there in 1999. There was many/many a month when paying my bills was very hard to meet.
    So I would not be in favour of exemptions and can we please stop talking about negative equity.
    I don’t mean to sound blase but I too have a lot of financial problems mortgage or no mortgage.

  4. will fowler at 3:02 pm

    The Politicians of this country are totally out of touch with the Finances of the ordinary people.
    The following has happened in the last 4/5 years.
    A Property crash, banks having to be balied out, people losing their jobs, emmigration, privitisation of refuse collection,increased costs in services (eg)
    Gas,Electricity,Petrol/Diesel.
    There has also been the huge issue of Negative Equity which has effected the younger generation who bought their first home and are now saddled with a property that they can never sell without making a loss. Now we all face the issue of the Property Tax and the Water Charges to be fully implemented after this debacle of the Household Charge. Services in the County Councils are been cut and the excuse being given is the lack of non payers of this charge. It has always been well known in this Country that the common person is screwed and the rich get away with everything. I would just like to suggest to Government that people who are lucky to have wealth should be targeted first rather than the so called lower/middle class who are coming to or are at breaking point.

    The results of your question is the truth and every cent is been counted by people and there is a genuine fear in people over how they are going to survive all of this into our gloomy future.Let’s all hope the politicians instead of blaming each other can get the cop on to ensure this country is not going to end up like Greece through the severe austerity cuts made and have a major revolt on their hands-I use the example of the pensioners.

  5. NIC at 2:48 pm

    Sick to the back teeth of the public service bashing. Be specific about the areas within it you have a problem with or we can only assume you also mean the people in the public service that are just above minimum wage and those who are the ordinary foot soldiers who are paid the same as similar jobs in the private sector and have standard private style contracts and holiday time with less (or no) allowence options and bonuses that many a private sector company has (yes…even still).

    Anyway. That said, debt forgiveness has the potential to be very unfair to those who are struggling and stretching themselves to cover the mortgage (on an ‘affordable’ home). Even though I went this route to try to get a stable roof over my head (and kept it a small roof so as to avoid as much of the craziness as possible), with paycuts etc. my mortgage is now 50% of my income. Madness in any situation! I also think that any mortgage debt forgiveness on ‘boom’ priced properties should only be on private home properties and I’d go so far as to say that you should not be eligable if you have purchased extra investment houses etc.

    Yes, many people are struggling but some are struggling a lot more than others and don’t have ‘investements’ to fall back on and didn’t try to gamble.

    Trying to be modest and sensible with the private (only) property should be acknowledged first over those who took gambles with the property market just because they decided they could at the time!

  6. Andrew at 1:27 pm

    Task # 1: get rid of current debt?

    Pay it with what or do mean default?

    Task # 2: Get banks working and sell defaulters houses?

    How do you get banks without the money to lend working and who will buy all the houses since the banks can’t lend and would be in a worse position having sold the assets for a portion of the face value?

    Task # 3: Ensure banks do not lend to people who can’t afford it?

    At the moment they are not lending to those who can afford to repay (both business and private) what chance will they have with a loan book valued at 0?

    No point imposing taxs the majority can’t pay and pulling the taxs of those who can into the black pit of Government departments who will send it out of the country to service debt?

    Defaulters homes sold, what a great idea so then we have thousands of people on the Local Authority housing lists, the same people will have to give up working to qualify for State services to keep families together.

  7. Maureen O’Conner at 12:52 pm

    Abolish cash. All transactions done by card. All payments and money receipts would then be traceable and it would end, in an instant, black market activities which contribute NOTHING to Ireland’s economy. Just think, there would be no more ‘jobs for cash’ where no income tax or VAT is paid, adding millions to Irelands bank balance and reducing our deficit. Another spin off would be a virtual end to theft. If there was no cash, no-one could sell any stolen goods because all transactions would be traceable. The same applies to drug dealing, bribes and ‘back-handers’ to corrupt officials, illegal weapons trading – the advantages go on and on…..

  8. lp at 12:15 pm

    Task # 1: get rid of current debt.
    Task # 2: Get banks working and sell defaulters houses.
    Task # 1: Ensure banks do not lend to people who cannot afford it.

    unfortunately tax increases are inevitable, we still have the same outgoings but with less people paying tax.

    Defaulters homes should be released to the market and let nature take care of the prices.

  9. Tom English at 12:14 pm

    This is veering from property tax, but it could help a lot of people & put some money into the economy , in the good times people put a lot of money into AVC ‘s some have lost there jobs or seriously getting reduced income , if they were allowed to withdraw this money without penalties it would them and also put money into the economy , this would cost the exchequer nothing , not like some of the daft changes that are costing the country millions, eg. Retiring more teachers than necessary with all associated costs ( paying for replacements + pension + lump sums ) . Teachers are only one example

  10. NJH at 11:58 am

    Its simple really. We have a vastly over-paid public service machine that protects itself from taking the hard measures the private sector have had to endure for the last 4/5 years. Public servants are the best paid in Europe and now out-strip the private sector by 30-40%. What public servants forget, is that they are paid out of the taxes of the private sector. So how or why should they earn more? Unless this reality is faced and faced quickly the country is doomed. And tell me this, why is no one focusing on the salaries and perks of the ‘beardy’ B£”%rtds that run the unions protecting the public servants? this anonymous bunch of individuals earn salaries that defy belief, yet contribute nothing to society, how is it that this travesty has yet to be fully exposed by the media? why dont we see articles on the crazy earnings of the union leaders??

  11. Frank Bodley at 11:34 am

    There has to be a graded Mortgage debt writeoff on properties bought between 2005 (not 2006) and 2008.
    The Government and the banks got us into this mess in the first place so they have to pay the piper. How they do it is as much our business as theirs. The German and French bondholders eventually will indirectly have to pay for their greed in fueling the Boom. Those of us who bought before 2005 are unfortunately caught up in the storm whether it is Charities who saw their Blue chip investments disappear or private individuals/parents who raised money on their family homes so their children have their own homes.

  12. Andrew at 11:34 am

    Ability to pay is not being factored in because our Government are working on the same principle that they are being subjected to by the Troike.

    Also because they are very much shielded from the poverty that exists in their own constituencies by the starting pay levels of €98,000 for a T.D. and €30,000 for a County Councillor (part time job).

    The politicians like to appear as patriots because they stand for election, in truth they are really being self serving, the nice pay cheque, expences that appear to be available for everything from turning up in the Dail to travelling expences for going home.

    Messrs Noel Dempsey and Dermot Ahern are great examples of how to keep milking the political system, look them up on Linkedin both offering consultancy services based on their “Contacts”.

    We can give out about the public service pay but in truth they are the only grouping who have a steady income, without their ability to pay their bills and buy goods and services this economy would in an even worse position.

    Reform should have started at the top (as promised) cut TD numbers by at least 50%, cap all politicians payments including allowances at €100,000, begin the wind up of the County Councils we have too many duplicating services, in the meantime everyone who serves as a Councillor gets no more than €5,000 in vouched expences, (Lets see who the patriots are at the next local election).

    Start using our veto in the EU parliament until they get the message that the Irish people have had enough of the suicidal dictatorship being imposed on this country.

    It is obvious that the “Friendly” approach adopted by Enda & Co is not to the benefit of the majority of the people, time to start leading from the front.

    If necessary split from the Euro and regain control of our finances, yes it will be hard but we could end up much stronger as a nation and a people from the ensuing fight for survival instead of the current system of being held to ransome by Euro technocrats who are slowly bleeding us and other countries dry with their restrictive policies.

    We have not as yet seen the results of the pain imposed by our State assuming private bank debt, a process they appear to have been forced into by the EU Technocrats.

    We have GNP at 0 possible in the minus figures, a Government who insist on using misleading GDP figures to try to fool the people.

    We have Dail Time being wasted by the Taoiseach and TD’s constantly referring to the mess F.F. left us in, well Taoiseach we know what they did it happens to be why you got the job, a job you fought hard for in the election using every possible misleading statement and promise to try to ensure a bigger majority, time to take on the job they were elected to do or admit their incompetancy and step down.

    Reform, begin again everyday delayed is just making it harder for the future, we can’t pay what we haven’t got, the people need to get that message across and in turn our Taoiseach can make the same point to our Troike Masters.

  13. desmond connolly at 11:31 am

    why does it take so many people to run the island all the parties do is argue why not abolish fianna fail put them on pensions about 50 grand a year and a redunancy package they ruined the country and others as well they only got over 20 seats have a wealth tax every one means tested all the rich do is put the money into the banks is that the reason there is not a wealth tax as the banks are in trouble its the ordinary people that spend the money yours desmond

  14. padraig at 11:14 am

    Landlords in dublin can still rent there property as against Leitrm or other country area,however most are on restructed mortgages and if the banks get tough on this there will be more defaults.
    My position is purchased a house in 2004 for €401k Ebs gave me 100% loan and stamp duty on interst only for 5 years the rent covered this at time,at present the rent only covers70% of the interst with te rest coming from on own resources and we have to pay for insurance,maintaince etc ,if we were put on full repayment we would have to pay €3020 a month which we cannot do and as the house is worth €250k we have not got many options,so as you can see if people like us start to default there will be large write offs.
    We may be mad to continue to make these payments but we are trying to meet our obligations with EBS but not if we go to full payment terms.

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