AT LEAST 140,000 homeowners have fallen into negative equity, with this figure expected to rise to 200,000 by the end of next year, it was warned last night.
Jim Power, chief economist with Friends First, said: "I reckon the majority of first-time buyers who bought into the market over the last three years are in negative equity."
Analysing the gains made up to the peak of the housing boom, and the losses since, Mr Power said negative equity was affecting "at least 140,000 people and that's rising by the day".
He warned that, in terms of the recession, "we haven't seen anything yet" and predicted the numbers in negative equity could reach 200,000 by the end of 2009.
Latest Census figures show there were 570,000 residential mortgage holders in 2006, with tens of thousands of new mortgages taken out since.
So the continuing decline in house prices means that one in three mortgage holders are likely find themselves trapped in a home worth less than the loan they took out to pay for it.
With €125bn owed on Irish mortgages, homeowners facing rising debts will be desperate for another European Central Bank interest rate cut, which could come on Thursday.
According to Mr Power: "Negative equity becomes a serious problem if you lose your job. It doesn't matter where house prices are or where interest rates are when you're faced with having to sell your property in a situation like that.
The Indo
Sunday, November 2, 2008
Saturday, October 11, 2008
170,000 homeowners facing negative equity
MORE than half of those who climbed onto the property ladder between 2005 and 2007 will fall into negative equity by the end of next year if house prices continue to drop, according to new research.
Dermot O’Leary, chief economist at Goodbody Stockbrokers, expects by the end of 2009 house prices will have fallen 30% from their peak in February 2007.
This would leave some 170,000 with mortgages worth more than the value of their homes, with those who bought between spring 2006 and summer 2007 at greatest risk.
A sharp slowdown in property sales has made it difficult to gauge the scale of the slump, but O’Leary believes values are already down 20%. Sherry FitzGerald, the estate agency, said prices have dropped by 17% nationally since June 2006, and by more than 23% in Dublin.
Negative equity is a big problem for borrowers who want to move home or who fall into mortgage arrears, because they would be forced to sell at a loss.
“It’s an issue if you’re no longer able to pay the mortgage because you can’t afford to sell,” said O’Leary. “It’s a problem for those who are losing their jobs and it’s going to become a bigger problem as unemployment rises.”
More than 6% of the workforce is already unemployed and O’Leary expects this will grow to 8% next year.
Those who borrowed most or all of the prices of their homes are the most exposed.
One in three first-timers used 100% mortgages to get on the ladder in 2006, according to the Department of the Environment. This dropped to 26% last year as a slowing market caused banks to restrict availability of these loans. Lenders have now abandoned them completely.
Sunday Times
Dermot O’Leary, chief economist at Goodbody Stockbrokers, expects by the end of 2009 house prices will have fallen 30% from their peak in February 2007.
This would leave some 170,000 with mortgages worth more than the value of their homes, with those who bought between spring 2006 and summer 2007 at greatest risk.
A sharp slowdown in property sales has made it difficult to gauge the scale of the slump, but O’Leary believes values are already down 20%. Sherry FitzGerald, the estate agency, said prices have dropped by 17% nationally since June 2006, and by more than 23% in Dublin.
Negative equity is a big problem for borrowers who want to move home or who fall into mortgage arrears, because they would be forced to sell at a loss.
“It’s an issue if you’re no longer able to pay the mortgage because you can’t afford to sell,” said O’Leary. “It’s a problem for those who are losing their jobs and it’s going to become a bigger problem as unemployment rises.”
More than 6% of the workforce is already unemployed and O’Leary expects this will grow to 8% next year.
Those who borrowed most or all of the prices of their homes are the most exposed.
One in three first-timers used 100% mortgages to get on the ladder in 2006, according to the Department of the Environment. This dropped to 26% last year as a slowing market caused banks to restrict availability of these loans. Lenders have now abandoned them completely.
Sunday Times
Thursday, August 28, 2008
Fear of negative equity haunts owners
Negative equity is not just a problem for homeowners who want to sell their homes: borrowers may also find themselves unable to shop around for better deals, writes Caroline Madden
SOME SAY it's purely a theoretical problem unless you have to sell your home, while others have compared it to burning €50,000 in cash in your back garden. So is negative equity worth losing sleep over or has the issue been blown out of proportion?
Negative equity occurs when a mortgage is greater than the value of a property. As property prices have fallen nationally by 12.1 per cent since February 2007 - at least according to the Permanent TSB/ESRI house price index which measures mortgage drawdowns - borrowers who took out high loan-to-value mortgages and in particular 100 per cent mortgages and bought at the peak have been pushed into negative equity.
In the summer of 2005, First Active broke new ground with the introduction of the first 100 per cent mortgage in the State - making it possible for first-time buyers to get onto the property ladder without scrimping and saving for a deposit.
Other lenders quickly followed suit with EBS, First Active, Ulster Bank, Permanent TSB and Bank of Scotland soon offering similar products. However, in recent months lenders have effectively withdrawn 100 per cent mortgages from the market.
It is difficult to pin down exactly how many of these loans were taken out, as no official cumulative figures have been collated and the banks have been understandably coy on the subject, but it is estimated that one-third of all first-time buyers in 2006 opted for 100 per cent finance, which equates to 12,350 home loans.
In 2007, 5.5 per cent of loans provided were 100 per cent mortgages, which amounts to almost 8,700 mortgages. So, at a conservative estimate, 21,050 homeowners have 100 per cent mortgages and are therefore extremely vulnerable to negative equity.
Of course it's not just those who borrowed the full price of their home who are at risk. Given the magnitude of the recent fall in property prices, anyone with a high loan-to-value mortgage is in the danger zone. According to Davy Stockbrokers, 69 per cent of first-time buyers in 2006, which equates to roughly 25,570 mortgages, had a loan-to-value ratio of more than 90 per cent.
Davy has predicted that 40,000 first-time buyers would face an average paper loss of €18,200 if house prices fall by 10 per cent this year. Prices have already fallen by 5 per cent in the first half of the year according to the Permanent TSB/ESRI figures and anyone in the market will tell you that where properties are selling at all the fall is far greater.
The Irish Times
SOME SAY it's purely a theoretical problem unless you have to sell your home, while others have compared it to burning €50,000 in cash in your back garden. So is negative equity worth losing sleep over or has the issue been blown out of proportion?
Negative equity occurs when a mortgage is greater than the value of a property. As property prices have fallen nationally by 12.1 per cent since February 2007 - at least according to the Permanent TSB/ESRI house price index which measures mortgage drawdowns - borrowers who took out high loan-to-value mortgages and in particular 100 per cent mortgages and bought at the peak have been pushed into negative equity.
In the summer of 2005, First Active broke new ground with the introduction of the first 100 per cent mortgage in the State - making it possible for first-time buyers to get onto the property ladder without scrimping and saving for a deposit.
Other lenders quickly followed suit with EBS, First Active, Ulster Bank, Permanent TSB and Bank of Scotland soon offering similar products. However, in recent months lenders have effectively withdrawn 100 per cent mortgages from the market.
It is difficult to pin down exactly how many of these loans were taken out, as no official cumulative figures have been collated and the banks have been understandably coy on the subject, but it is estimated that one-third of all first-time buyers in 2006 opted for 100 per cent finance, which equates to 12,350 home loans.
In 2007, 5.5 per cent of loans provided were 100 per cent mortgages, which amounts to almost 8,700 mortgages. So, at a conservative estimate, 21,050 homeowners have 100 per cent mortgages and are therefore extremely vulnerable to negative equity.
Of course it's not just those who borrowed the full price of their home who are at risk. Given the magnitude of the recent fall in property prices, anyone with a high loan-to-value mortgage is in the danger zone. According to Davy Stockbrokers, 69 per cent of first-time buyers in 2006, which equates to roughly 25,570 mortgages, had a loan-to-value ratio of more than 90 per cent.
Davy has predicted that 40,000 first-time buyers would face an average paper loss of €18,200 if house prices fall by 10 per cent this year. Prices have already fallen by 5 per cent in the first half of the year according to the Permanent TSB/ESRI figures and anyone in the market will tell you that where properties are selling at all the fall is far greater.
The Irish Times
Monday, July 28, 2008
New homeowners caught in negative-equity loan trap
THOUSANDS of first-time buyers are being forced to pay out sky-high mortgage rates because negative equity has trapped them with their current lender.
The new buyers, who purchased their houses with 100pc mortgages, are now unable to switch to a cheaper lender because they have no equity built up in their homes.
They have been hit by a double whammy -- stuck with high repayments and a house worth less than the price they paid.
Those who took out 100pc mortgages have probably seen about €50,000 each wiped off the value of their homes.
The relentless fall in house prices since the start of 2007 has resulted in many of these people finding themselves in negative equity. This is where the value of the mortgage is greater than the value of the property.
As many as 40,0000 new buyers could be in negative equity, according to recent calculations by stockbroking firm Davy. This calculation was based on first-time buyer house prices falling by 10pc in the past year. In the past year alone, first-time buyer houses have fallen by 9.4pc.
The Indo
The new buyers, who purchased their houses with 100pc mortgages, are now unable to switch to a cheaper lender because they have no equity built up in their homes.
They have been hit by a double whammy -- stuck with high repayments and a house worth less than the price they paid.
Those who took out 100pc mortgages have probably seen about €50,000 each wiped off the value of their homes.
The relentless fall in house prices since the start of 2007 has resulted in many of these people finding themselves in negative equity. This is where the value of the mortgage is greater than the value of the property.
As many as 40,0000 new buyers could be in negative equity, according to recent calculations by stockbroking firm Davy. This calculation was based on first-time buyer house prices falling by 10pc in the past year. In the past year alone, first-time buyer houses have fallen by 9.4pc.
The Indo
Tuesday, June 3, 2008
Monday, June 2, 2008
Negative equity hits 250,000 - and there is worse to come
After months of gloomy forecasts, analysts have finally confirmed the news that homeowners had been dreading for months: that large numbers of British householders have slipped into negative equity.
According to the investment bank Citigroup, a quarter of a million of them now owe more than their properties are worth since house prices started to drop at the end of last year.
Citigroup said prices had dipped by 7 per cent since the autumn and the bank's chief UK economist, Michael Saunders, yesterday warned that house prices could fall by 15 per cent or more by the end of 2009. Such a drop would leave at least a million homeowners in negative equity.
The Guardian
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