Are you a Struggling homeowner?July 25, 2017
There are three main issues facing homeowners:
1. Mortgage arrears;
2. Negative equity;
3. Future “normalisation” of interest rates
The good news – the number of homeowners in mortgage arrears (having missed 1 or more regular mortgage repayments) has been slowly falling for the last few years. Which is great if you’re one of those homeowners who are no longer in arrears.
The bad news – there are still a very high number of homeowners in arrears with their mortgage who are therefore at risk of losing their home and under a great level of stress and worry.
The figures – according to the Central Bank of Ireland’s figures at the end of 2016 over 77,000 homeowners were in arrears with their mortgage (and over half of these by more than 1 year). This is more than 1 out of every 10 mortgages. On top of this almost 16% of all Buy to Let mortgages are in arrears.
Being behind with your mortgage usually results at the very least in you having to pay back more than originally expected in the long term as interest and penalties are racked up together with all the stress and worry. At worst it can result in your home being repossessed and Bankruptcy.
The good news – the number of homeowners in negative equity (the value of the home is less than the mortgage) has been falling steadily since the peak at the end of 2012.
The bad news – there are still approximately 75,000 homeowners in this position.
The figures – homes in negative equity peaked at over 300,000 (over 1 in every 3 mortgage holders) at the end of 2012. With rising house prices and low interest rates this has fallen to approximately 75,000 today. However, this is still about 1 in every 10 mortgaged homeowners.
Being in negative equity is often, quite rightly, described as being caught in a trap as homeowners, who may also be struggling to pay their mortgage, are unable to sell their home as they have no way of repaying the mortgage in full.
The good news – interest rates continue to bump along at all time low levels.
The bad news – the only way is up for interest rates.
The figures – nearly ¾ of a million mortgages are either trackers or standard variable rate mortgages rather than fixed interest rate mortgages. This means that when interest rates go up so will mortgage payments.
Often in our economic cycle we follow US interest rates after a short delay. US Federal Bank interest rates were increased in the last couple of weeks with indications this is just the first of quite a few further rises. The European Central Bank hasn’t raised interest rates yet but we should be prepared for a return to normality in interest rates relatively soon.
What should and shouldn’t struggling homeowners do?
Talk to your Bank. Maintaining good communication with your Bank is vital and you can ask them for help and assistance if you are struggling to make your mortgage payments. Over the last few years the Bank’s have put in place specialist teams to try and help their customers who are struggling with their mortgage payments.
Have an honest review of your circumstances – can you cut down on items of expenditure and/or can you really afford the size of house you are in? Ask yourself whether staying in your current house is worth all the financial stress and worry.
Seek help from a regulated professional such as a Personal Insolvency Practitioner (PIP). If you are insolvent, in arrears and at risk of losing your home the Government will pay for you to get free advice from a PIP, with Government insolvency legislation specifically designed to try and allow homeowners to remain in their homes .
It is vitally important that you do not (continue to) stick your head in the sand and hope matters just get better by themselves.
Don’t think that just because your mortgage debt has been sold to another organisation or a “Vulture Fund”, even if at a discount, that somehow this means you no longer have to pay your full mortgage. Such transfers are increasingly common and the Supreme Court recently specifically confirmed “the underlying exposure remained the same”. The Courts have been consistently clear on this subject.
Don’t believe the Human Rights defence of right to a family life will somehow, miraculously, prevent your Bank from repossessing your home if you don’t pay your mortgage. If your lawyer suggests this, get a new lawyer! The European Convention on Human Rights was designed to protect individuals from fascism, torture, excessive and cruel States etc. The fundamental human right to a family life isn’t translated to mean you can stay in your home without paying your mortgage just because your family lives there. You will have a family life irrespective of which particular house you live in.