Home debt-trap hits 340,000...
Massive rise in borrowers caught in negative equity
AS many as 340,000 people could now be in negative equity following a sharp fall in house prices.
New research which reveals up to a third of a million people owe more on their mortgage than their homes are worth is considerably higher than recent estimates that found 250,000 homeowners were in negative equity.
Being in negative equity means you cannot switch mortgages for a better deal, fund a move to a larger home to start a family, or move house to take a job somewhere else.
Economist with property website Daft.ie Ronan Lyons has calculated that 340,000 people, or one in five homes, are now in this predicament.
"That's 340,000 homes where if the homeowners have to sell, they will not be able to pay the bank back solely through the money they get from selling the house," Mr Lyons said on his blog site (ronanlyons.wordpress.com).
The findings are broadly in line with a survey by Amarach Research in February, which found that 15pc of those with a mortgage thought their homes were worth less than they paid for them.
Mr Lyons estimates many of the homes bought in the past five years are in negative equity, especially those where a 100pc mortgage was taken out.
But even many of those who took out a mortgage since 2004 with a mortgage for 70pc of the value of the property (ie they had a deposit of 30pc of the value of the property) would also now be in negative equity.
People in negative equity have been characterised as being "prisoners in their own homes" as they cannot trade up or switch mortgage providers.
This is particularly the case for those locked into uncompetitive fixed-rate mortgages.
These people will not have benefited from the seven falls in European Central Bank interest rates since last October and may be paying up to €500 a month in repayments than someone on a good value tracker mortgage. And lenders are reluctant to do deals to release homeowners from fixed rates, especially if the mortgage holder is in negative equity.
Homeowners need their bank or building society's permission to sell their home if it is worth less than the mortgage secured on it. House prices may have fallen as much as 40pc since the peak of the housing boom in the first three months of 2007, according to estate agents.
However, the ESRI/Permanent TSB house price index records much less dramatic falls. According to that index, the price of an average house nationally was €311,000 in March 2007, but has fallen to €250,000 now.
Negative equity is not a problem for those who do not need to move house and can meet their monthly repayments.
Separately, new figures show that the number of people who are more than 90 days in arrears on their mortgage has almost doubled for Irish lenders.
Figures from credit ratings agency Moody's showed that 1.7pc of a large sample of mortgage holders were in arrears.
Report by Charlie Weston - Irish Independent
Massive rise in borrowers caught in negative equity
AS many as 340,000 people could now be in negative equity following a sharp fall in house prices.
New research which reveals up to a third of a million people owe more on their mortgage than their homes are worth is considerably higher than recent estimates that found 250,000 homeowners were in negative equity.
Being in negative equity means you cannot switch mortgages for a better deal, fund a move to a larger home to start a family, or move house to take a job somewhere else.
Economist with property website Daft.ie Ronan Lyons has calculated that 340,000 people, or one in five homes, are now in this predicament.
"That's 340,000 homes where if the homeowners have to sell, they will not be able to pay the bank back solely through the money they get from selling the house," Mr Lyons said on his blog site (ronanlyons.wordpress.com).
The findings are broadly in line with a survey by Amarach Research in February, which found that 15pc of those with a mortgage thought their homes were worth less than they paid for them.
Mr Lyons estimates many of the homes bought in the past five years are in negative equity, especially those where a 100pc mortgage was taken out.
But even many of those who took out a mortgage since 2004 with a mortgage for 70pc of the value of the property (ie they had a deposit of 30pc of the value of the property) would also now be in negative equity.
People in negative equity have been characterised as being "prisoners in their own homes" as they cannot trade up or switch mortgage providers.
This is particularly the case for those locked into uncompetitive fixed-rate mortgages.
These people will not have benefited from the seven falls in European Central Bank interest rates since last October and may be paying up to €500 a month in repayments than someone on a good value tracker mortgage. And lenders are reluctant to do deals to release homeowners from fixed rates, especially if the mortgage holder is in negative equity.
Homeowners need their bank or building society's permission to sell their home if it is worth less than the mortgage secured on it. House prices may have fallen as much as 40pc since the peak of the housing boom in the first three months of 2007, according to estate agents.
However, the ESRI/Permanent TSB house price index records much less dramatic falls. According to that index, the price of an average house nationally was €311,000 in March 2007, but has fallen to €250,000 now.
Negative equity is not a problem for those who do not need to move house and can meet their monthly repayments.
Separately, new figures show that the number of people who are more than 90 days in arrears on their mortgage has almost doubled for Irish lenders.
Figures from credit ratings agency Moody's showed that 1.7pc of a large sample of mortgage holders were in arrears.
Report by Charlie Weston - Irish Independent