Wednesday 21 March 2018

Homeowners will be stuck in negative equity for 14 years

Charlie Weston

HOMEOWNERS who bought at the peak of the boom could be paying off their mortgages for another 14 years before they reach a point where they have repaid enough to take them out of negative equity.

It is estimated that up to 350,000 mortgage holders are in negative equity, where the value of the loan is greater than the value of the property.

Most people in negative equity are able to meet their repayments, but face huge difficulties selling or getting a top-up loan.

Now a new report compiled by Frank Conway of personal finance website has concluded that it could be 2025 before many of those who bought during the property boom escape negative equity.

Such has been the fall in property prices that even if prices stop falling next year, it would take boom-time buyers a decade and a half to repay enough to wipe out their negative equity.

The gloomy prediction has coincided with Belgium-owned bank KBC upping its standard variable rate by 0.25pc from yesterday.


This will cost a family with a €200,000 mortgage an extra €30 a month in higher repayments.

Standard variable rates will rise to 4.5pc as the lender passes on the July rise in European Central Bank (ECB) rates to its customers. It follows EBS, which said last month it was increasing its standard variable interest rate by 0.25pc.

The new EBS variable rate will be 4.93pc (5.1pc APR) from October 1 even though the ECB rate is 1.5pc and unlikely to rise in the short term. It was the third rise in the EBS variable rate this year.

Higher rates are expected to push more into difficulties with their mortgages and delay any recovery in the market.

More than 55,000 people are three months or more in arrears on their mortgages, while house prices have fallen by 43pc from their peak in 2007.

Mr Conway has calculated that a family that bought a house at the top of the market for the average price of €311,000 will now be left with a property worth just €177,000.

But they will still owe the bank €286,000 after making repayments for four years, leaving negative equity of €108,000.

Irish Independent

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