Possible solutions to the Problem of negative equity
SUCH is the extent of the negative equity problem facing many thousands of households, many observers are rightly concerned that this presents a huge risk to the prospect of economy recovery.
Patricia Foskin, of brokers Foskin Mortgages and Finance, says the Government and the banks may consider bringing in some type of assistance to those who may have to move or trade up.
If a household is €50,000 in negative equity, then banks or local authorities could issue a low-interest personal loan, perhaps at the current mortgage interest rate, for a 10-year term.
"This means the buyer will more than likely trade up to a bigger house at current prices so will more than likely end up with a smaller or similar mortgage than he or she originally had," she says.
Ms Foskin adds that borrowers can also avail of the extension of mortgage interest relief to 2017, as announced in the Budget.
Kevin McNerney, director of the Mortgage Finance Company, says there were rumours that banks here were looking at possibly introducing products similar to those available in the UK, whereby someone could trade up to a new house and transfer part of the negative equity to a new property, and also pay a lump sum towards it.
"This allows people to move to a more suitable property and, although they would still be in negative equity, they would now be in a property that would be more suitable to their requirements and therefore reducing their need to move again for the foreseeable future," he said.
"Unfortunately, however, I feel it would be some time, if ever, that we saw an Irish bank introducing a product like this," he added.