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FOR the post-boom generation negative-equity mortgages have the potential to offer a lifeline, but they come with a big health warning and are only being offered by a few lenders.
This new form of loan will appeal, particularly, to those who paid way over the odds for a shoebox of an apartment at the top of the market.
The property was just about big enough to accommodate a couple when they moved in.
At the time, they bought because they feared prices were spiralling up at such a rate that the dream of owning a home would end up being beyond them.
Now, they want to move on or to start a family.
But they are trapped, with the 50pc collapse in property prices effectively turning them into prisoners in their own homes.
These people are desperate to get out of the fix that sees them repaying a mortgage on a property that is worth a fraction of what they paid for it.
They are stuck on the first rung of the ladder, and there is no going up and there is no getting off.
Now, with EBS joining AIB, Permanent TSB and Bank of Ireland in introducing negative-equity mortgages, the prospect of some movement has opened up.
For EBS, the value of the new mortgage cannot exceed 175pc of the value of the new home.
And the deal will only be offered to residential homeowners, but it will include apartment owners.
That's the good news. The bad news is that few lenders have, so far, stepped up to offer these new products.
There are more than a dozen lenders with a legacy of mortgages from the boom, but less than one quarter of them are now offering negative- equity mortgages.
The other problem is that the lending criteria applied to get approval for one of these loans will be restrictive.
Forget about applying unless you are moving steadily up the line, in terms of promotion in your job.
And if you have a family, it will be harder to get approval as banks see child-rearing as an expense that leaves less money for servicing a mortgage.
Ironically, the very reason people trapped in a small home will want to move is to start a family.
One lender offering negative-equity mortgages, Permanent TSB, said yesterday that it had only done a handful of these recently with each assessed on a case-by-case basis.
The other issue is that property prices will have to rise to avoid these new loans sending people deeper into debt.
So negative equity mortgages are only likely to be a solution for a select few.
Irish Independent
