170,000 staring at negative equity
Monday October 13 2008
AROUND 170,000 people may fall into the negative equity trap by the end of next year if house prices continue to plummet, research shows.
It is expected that by the end of 2009 house prices may have dropped by as much as 30pc from their 2007 peak, according to Goodbody Stockbrokers.
Prices have dropped nationally by around 20pc so far, and Goodbody Stockbrokers chief economist, Dermot O'Leary, expects a further 10pc drop by the end of next year.
More than half who bought between 2005 and 2007 will fall into negative equity next year if property continues to lose its value, according to the research.
Peak
One in three first-time house buyers who purchased during the peak in property prices in 2006 used 100pc mortgages to get on the property ladder.
The research also forecasts that unemployment will grow from 6pc to 8pc next year, which will make mortgage repayments more difficult for those affected.
Negative equity, which leaves people owing more on their mortgages than their property is worth, causes difficulties for those wishing to move house, or those who are unable to pay their mortgages but reluctant to sell in a difficult market.
However, even as repossessions rise, the evidence from other economies suggests most people will not lose their homes. Cormac O'Dea, from the UK Institute for Fiscal Studies, told 'RTE News': "It happened in the UK in the early 1990s, it's happening here now.
"So the overall economic effect won't be critical as long as people keep paying their mortgages, and given that most of the banks passed on last week's interest rates cuts, if anything people are going to be finding it easier to pay their mortgages than they would have two weeks ago."
- Louise Hogan
