Housing market bad on both sides of coin

"First-time buyers have been hit and hit hard by the credit crunch, and so far our Government has done nothing to help them or intervene in the market," said Labour's finance spokeswoman Joan Burton.

"Cowen himself killed the property market stone dead by failing to act on stamp duty in December 2006 and now he and his Government are on auto-pilot," said Labour's deputy leader.

For mortgage holders, the news of house-price collapses means they are waking up this morning in negative equity. People are carrying mortgages on properties worth less than their borrowings, but many of those are in for the long haul and will survive the current crisis.

But at the extreme end of the collapsed housing sector is the increasing number of repossession orders being made to the High Court by financial institutions.

Last week alone saw a number of leading financial institutions, such as AIB and Bank of Ireland, take their place on the list beside the sub-prime lenders seeking to repossess properties from payment defaulters. Sub-prime lenders, which provide loans and mortgages to those with chequered credit histories, filled the lists at the courts last week. Two lenders -- Start mortgages and GE Capital -- accounted for most of the cases.

Worryingly, the number of possession applications this year remains at the same high level of 2007, which had jumped 50 per cent on 2006, showing the drastic impact of what happens when things go wrong.

Despite the claim by the Financial Regulator Pat Neary that relying on repossessions is the "final option", Dermot O'Leary of Goodbody Stockbrokers said that there was no doubt that throughout this year, consumers would see house repossessions increase. "They are the byproduct of a slowdown, and while they have been at a historic low, there is no doubt we will see the number of housing repossessions rise as the slowdown takes hold," he said.

In the face of the increasing number of banks taking back properties, the need now arises for establishing a State- backed mortgage relief fund beyond the current system set in place by the Department of Social Welfare.

Such a fund to help those remain in their homes is surely more humane than booting people out on the street. Two factors will continue to keep the house market depressed throughout this year and into 2009.

Firstly, credit is far less available than it was 12 or 24 months ago. Banks across the board have tightened up on their lending criteria, with the aforementioned death of 100 per cent mortgages.

Borrowers seeking mortgages have had to resort to saving deposits, forcing many to sit by and watch house prices tumble without being able to do anything about it.

Secondly, the ECB is now highly unlikely to reduce interest rates in 2008, despite previous indications that such a drop might happen. That means the squeeze on already stretched mortgage holders is not about to subside until sometime next year.

The Sindo