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Dan White: Can I get out of variable rate mortgage on my ghost estate apartment?

Dan answers your financial questions

I AM living in a two-bedroom apartment that was worth €174,000 when I bought it but is only worth €70,000 now.

This is due to the fact that the apartment and estate are falling down around us and there are so many problems. I am on a standard variable rate mortgage with Permanent TSB and seem to be stuck with this.

I cannot get out of this variable rate and on to a fixed rate with any other lender, due to the fact that I am in negative equity, and the fixed rates charged by Permanent TSB are scandalous.

With interest rates rising, it seems that all of my cash is being drained by the mortgage and I will just have to keep paying more and more for a place that in a number of years will be worth nothing.

Is there any way I can get on to a fixed rate or even get out of the mortgage altogether?

Ian

It may come as little consolation to him, but Ian is not alone. There are thousands of people up and down the country who bought houses and apartments in what are now unfinished 'ghost estates'. In practice, many of these homeowners can't sell their properties at any price.

Ian is doubly unlucky in that his homeloan is with Permanent TSB, which charges by far the highest mortgage interest rate of any Irish-owned bank. Even before last week's ECB rate rise it was charging its variable-rate customers 5.19pc, and it announced that it would be passing on the full 0.25pc rate increase next month to bring its variable rate to a towering 5.44pc.

To add insult to injury, being stuck in negative equity means that he can't switch his loan to another lender.

Further compounding Ian's problems is the fact that Permanent TSB is effectively out of the fixed-rate business. It is no longer offering the option of fixed-rate mortgages to variable-rate customers, while customers coming off a fixed-rate mortgage will be charged 8.75pc if they choose to fix once again, an interest rate Ian is perfectly justified in describing as "scandalous".

Unfortunately for Ian, the outlook is bleak. The ECB is likely to increase rates by a total of 1.5pc over the two years. This would bring Permanent TSB's standard variable rate to a punishing 6.69pc.

Meanwhile, simply walking away from the mortgage isn't an option as Irish mortgages are full recourse loans, which means that, even after the house is sold, the lender can continue to chase the borrower for any shortfall.

I HAVE a large unpaid credit card balance with MBNA and as a result I have to pay a lot of interest every month. So far I have just about managed to make my monthly payments. Will last week’s interest rate rise by the ECB push up the interest rate I pay on my credit card? And, if so, by how much?

Grace

Even before last week's increase by the ECB, credit card interest rates were already expensive. The interest rates charged by MBNA on its credit cards range from 14.9pc to 16.9pc, with the interest rate on its standard credit card being a hefty 16.9pc. In addition to these high interest rates, there is also the annual €30 stamp duty imposed by the Government on all credit cards.

So far, most of the credit card providers haven't put up their interest rates but if, as seems likely, the ECB follows up last week's interest rate rise with further rate hikes, then you can be sure that the credit card providers will pass on the higher rates to their unfortunate customers.

With most analysts now reckoning that the ECB will push interest rates by at least a cumulative 1.5pc over the next 18 months, that translates into an 18.4pc interest rate on the standard MBNA credit card if it passes on the full increase to its customers.


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