The majority shouldn't expect debt write downs any time soon

The majority shouldn't expect debt write downs any time soon

Many people have debt hanging over them as a result of large mortgage repayments on homes that are now in negative equity

Those struggling with mortgage repayments at present might have taken some heart from the fact that earlier this week AIB wrote off some debt for families while allowing them to remain in their homes.

However, these incidents are likely to be exceptions rather than the rule, with the vast majority of us forced to continue paying our way out of debt.

One of the biggest challenges facing the market at present is negative equity. There are thousands of people around the country who bought at inflated prices and are now unable to move as a result.

This has affected the market from a stock point of view with the buyer up market now effectively dead as people can no longer upgrade to bigger houses as their family situation calls for it.

In the past, people bought small before upgrading as they started having children but now many do not have this luxury because of negative equity.

The news of writedowns now taking place might have brought them some hope but the reality is it would cost around €50 billion to reduce the cost of all mortgages to their current value.

Minister for Enterprise Richard Bruton, who supplied that figure, said it would be impossible to write down such a cost so don’t expect any favours from either the government or the banks.

The 121,000 mortgages in arrears would take first priority were any other writedowns afforded but this is unlikely to happen in any large quantity.

The vast majority who are still paying big mortgages on properties in negative equity have no hope and unfortunately their spending power in the economy is hindered as a result.

If there is to be a solution to this problem then debt write downs, as much as we may like them, are not the answer.

Other proposed solutions such as mortgage-to-rent schemes have also brought about little success in the past.

The banks are, at least, appearing more realistic nowadays and their engagement with customers is a lot better than it was.

For many though, the only solution is to keep paying, as difficult as that may be to stomach. The only debt writedowns many of us will ever see is from the money we pay off our loans ourselves.

There are 5 comments for this article
  1. Nigel at 12:31 pm

    €50 Billion to save the people is too much, but, €64 Billion to save the banks is fine? The French Revolution began with less injustice.

  2. Darragh at 12:30 pm

    Until we get REAL leadership in this country we the people will continue to suffer for our lifetime and further.

  3. Fiona at 12:11 pm

    While I have every sympathy for people who find themselves in financial difficulties, I personally would not be happy to see large scale debt write downs. No one was forced to buy a house at any stage and so if you choose to buy at an inflated price, you can’t expect the rest if us to bail you out once you are unable to afford it. People do not expect to share the gains they make from property with the tax payers, so why should we fund the downside. Also, many filied thought it a good idea to keep more than one property as a source of rental income. Of you think it’s a good idea to become a landlord as a commercial enterprise, I certainly see no justification for why the rest of the innocent tax payers should pay for it.

    I do believe that banks need to engage more proactively and practically with people who are in arrears, but at the end of the day they made a choice to enter the property market. While they may regret it now, that was their choice and so remains their responsibility to find a reasonable solution with banks, not to seek permanent write off of the debts.

    Nobody seems to care about people who practiced financial prudence and who are trying to enter that property market and were thwarted by banks who refused to issue new mortgages as there are so many non performing loans; and people who refuse to move because of tracker mortgages; and those now caught in negative equity. There are no new houses being built, few decent houses coming on the market and any that do come on are being caught in bidding wars. So as there is no will to help those people, why should we help the people who created their own circumstances. Many people continue to service their. Debts even when in negative equity, so writing off the debt who can’t/won’t pay is rewarding people for nonperformance in my opinion.

  4. ALEC at 11:29 am

    Oh dont worry i aint expecting anything in way of a right down on my mortgage then why would they when i have done the honest thing of actually paying my mortgage. Yes there is a few genuine cases of people not being able to pay their mortgages but i believe people are making a mockery of the system in refusing to pay their mortgage. People that money in savings account should have it removed it they do not pay their mortgage to cover what they are not paying. And then sure we knopw how corrupt this country is and i would not be at all suprised to hear that the people who got that right down are friends with someon in AIB. Because we know how trust worthy the banks are. but when was the last time anything was fairly in this country by our SO TRUSTWORTHY BANKs and GOVERNMENT. They only look after their friends in their circle of love. And with the way the banks are being controled or checked makes me go wh ythe hell am i paying my mortgage. surely i should just go NO. I am not paying. but i still have some principles left and a understanding of what is right and wrong. but its anything seems to be fine unless you get caught. Well guess what govenment and banks you have been caught out as to how corrupt you are.

  5. Stephen at 11:21 am

    “The 121,000 mortgages in arrears would take first priority”

    So those who stopped paying years ago while continuing to take holidays and buy new cars had it right.

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