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Repossessions Taskforce Findings Due To Be Published

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Repossessions taskforce findings due to be published

http://www.bbc.co.uk/news/uk-northern-ireland-28129490

Northern Ireland suffered a huge housing bubble followed by a crash which saw prices fall by almost 50%. As a consequence, rates of negative equity are much worse than elsewhere in the UK.

Earlier this year, the mortgage service firm HML calculated that 41% of mortgages taken out since 2005 were in negative equity. In contrast, the figure for the UK as a whole is just 8%.

Households in negative equity are usually unable to to move their mortgage or get any sort of discounted deal. That means they will be stuck on the Standard Variable Rate (SVR) and will not have the opportunity to get onto a fixed rate deal ahead of interest rate rises.

Meanwhile, the number of new repossession cases started in the High Court in 2013 stood at almost 3,700. That is below the peak in 2009, but is still well above the pre crash level of around 2,500 new cases a year.

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http://www.bbc.co.uk/news/uk-northern-ireland-28129490

A major "at risk" group identified by the taskforce are households who undertook "equity release" remortgages at the height of the market.

They are people who increased their mortgages to release cash for other purposes, such as home improvements or to finance buy-to-let properties.

In 2007, 74% of remortgaging in Northern Ireland was for equity release.

The taskforce said this category of "credit hungry" borrower was disproportionately active in Northern Ireland.

Lower income groups who took out "second charge" mortgages with subprime lenders are also at high-risk.

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So those at risk at the mew -ers who remortgaged to purchase buy to let. I'll help Stormont with a policy statement.

"They denied young people the chance to buy by inflating prices -- so let them sink with their debts."

What we need is for rates to rise and kill the zombies. People haven't learned the lessons of the last crash. Forbearance and low rates has meant that the majority that borrowed recklessly haven’t had to deal with the consequences of their greedy financial decisions. I can only hope that the (IMO) inevitable crash across injects some further realism in the N.I. market.

Queue the feel good stories in the local media. Invest must be able to wheel out some multinational they’ve funded to the tune several million to bring us some minimum wage , tax credit supported, call centre jobs.

It said that the Northern Ireland economy "remains some distance from reaching escape velocity"' and that borrowers are "poorly equipped to absorb future income shocks".

Edited by 2buyornot2buy

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No mention of co-ownership (run by DSD) - was this part of the problem? Also no namecheck for HPC????? surely a trick missed there!!

http://www.dsdni.gov.uk/rtf-initial-evidence-paper.pdf

Possibly reflecting the popularity of buy- to-let (BTL) mortgages, interest only (IO) loans represented 41.7 per cent of all loans during the period of rising prices

The qualitative evidence suggests that over indebtedness through second charge and unsecured loans is a particular issue amongst "homeowners" who exercised their ‘right - to - buy’.
Despite a reliance on credit, borrowers often lack basic financial literacy skills. Within NI,17 per cent of borrowers do not understand the terms and conditions of their current mortgage; this proportion increases to 28 per cent for lower income households and 29 per cent for 61 to 70 year olds
Edited by Shotoflight

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No mention of co-ownership (run by DSD) - was this part of the problem? Also no namecheck for HPC????? surely a trick missed there!!

http://www.dsdni.gov.uk/rtf-initial-evidence-paper.pdfPossibly

reflecting the popularity of buy- to-let (BTL) mortgages, interest only (IO) loans represented 41.7 per cent of all loans during the period of rising prices

The qualitative evidence suggests that over indebtedness through second charge and unsecured loans is a particular issue amongst "homeowners" who exercised their ‘right - to - buy’.
Despite a reliance on credit, borrowers often lack basic financial literacy skills. Within NI,17 per cent of borrowers do not understand the terms and conditions of their current mortgage; this proportion increases to 28 per cent for lower income households and 29 per cent for 61 to 70 year olds

Need to remove the "Possibly" at the end of the URL link to the report.

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A real eye-opener of a report.

Mods can this be pinned to the top of the forum?

This section in particularly jumped out to me.

The level of indebtedness in N.I. is staggering.

The extent to which NI borrowers are exposed to future income shocks is illustrated by the proportion of highly geared mortgages in the region. Around 15 per cent of borrowers currently spend a third or more of their after-tax income on mortgage repayments. Should interest rates rise in line with the Office for Budget Responsibility’s (OBR) projections the proportion of highly geared borrowers in the region is expected to rise to 26 per cent by 2018 (Whittaker, 2014). While the proportion affected will continue to be largest in the lowest income deciles, the range of borrowers affected by high repayment gearing is expected to climb the income scales.

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We must end this addiction to debt as the engine of growth

There has been no serious attempt to get to grips with the financial cycle, which requires moving away from debt as the engine of growth

http://www.telegraph.co.uk/finance/comment/jeremy-warner/10936887/We-must-end-this-addiction-to-debt-as-the-engine-of-growth.html

And now its warning lights are flashing red once again – about the disconnect between buoyant financial markets and underlying economic realities, about a recovery which is too dependent on debt and unconventional monetary stimulus, about the depressing lack of productivity growth, about companies that prefer to downsize and buyback their own shares to investing in the future, about developing asset bubbles and the risk they pose to financial stability, and about the cowardly propensity of policymakers to take the easy option, rather than the tough decisions necessary to create a durable recovery.

Edited by Shotoflight

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"In 2007, 74% of remortgaging in Northern Ireland was for equity release."

Says it all really. Three quarters of the re mortgage borrowing in 2007 was not for the house itself but for extracting equity. A sale was not involved.

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Forbearance (vulnerable to interest rate rises - others with negative equity locked into svr and cannot push for better terms)

Conversion to interest only (IO) contracts has been a key feature of lenders’ initial response. Within NI this migration has been particularly prevalent and the region has the highest rates of conversion to IO terms in the UK (Experian, 2013). However, due to concerns over the sustainability of this option, IO forbearance is becoming harder to secure.
Young and old will suffer most in a 2.5pc world By pandering to imprudent state and personal borrowing policymakers have shown scant regard for the prosperity of Britain's least indebted

http://www.telegraph.co.uk/finance/personalfinance/savings/10937500/Young-and-old-will-suffer-most-in-a-2.5pc-world.html

Forget earning 5pc on your savings when our economy returns to rude health - the "new normal" will be half that. And as you digest the meaning of that number for your own finances, consider also the cruel long-term effects on the two groups in society with the least debt - the young and the elderly.

Both groups have, in effect, been financially maimed by a debt binge undertaken by others during the precrisis years. Young people have been locked out of the housing market; older people have been permanently condemned to pitiful returns on savings.Rates must remain rooted for a simple reason: Britain's collective profligacy. We have borrowed - and spent - far too much. A fifth of British households now have mortgages worth four times their incomes. Personal debt in Britain is now nearly £1.5trillion. At around £28,700 per adult, that is more than the average salary.

The Bank surmised that raising rates too high, too fast would lead to catastrophe. If rates hit 3.5pc, it said, a fifth of British households would have to curtail spending "significantly".

So policymakers will instead pull up a financial drawbridge. The Bank will protect those indebted to the hilt because our economy, now overly reliant on consumerism, cannot afford to make destitute great throngs of shoppers.

Millions will be left stranded. Take older savers whose mortgages have been mostly cleared. Many have since 2009 downgraded retirement plans as funds set aside for old age generate only meagre returns. Others are tied into woeful pension incomes because of policies to support borrowers, such as the "QE" money-printing scheme.

By pandering to imprudent state and personal borrowing - and failing to develop policies to tackle the resulting imbalance - policymakers have shown scant regard for the prosperity of Britain's very old and very young.

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I couldn't agree more. Worst still it appeared to be a promotion for a company that BT perhaps own. Something wrong with all that.

"Corrupt" would seem appropriate.

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If I was allowed out, I would hurt myself! Thanks.

A bit like those presumably at least eighteen year old big boys and girls who remortgaged the house to buy a nice car? There did seem to be an awful lot of mercs, BMW and jags round here back then - are they still being paid for 7 years later? Probably.

Sorry folks - make, bed, lie.

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A bit like those presumably at least eighteen year old big boys and girls who remortgaged the house to buy a nice car? There did seem to be an awful lot of mercs, BMW and jags round here back then - are they still being paid for 7 years later? Probably.

Sorry folks - make, bed, lie.

Now now Yada, the banks made them do it.

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So the property bubble was inflated by those who took advantage of the increase in prices to borrow to buy property which further inflated the bubble which allowed them to borrow more to buy property which....

Now why was any surprised by the bust? It all sounds like some fantasy perpetual motion machine.

I cannot see why anyone who got caught up in all this is any more deserving of sympathy than someone who went broke gambling on horses.

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So the property bubble was inflated by those who took advantage of the increase in prices to borrow to buy property which further inflated the bubble which allowed them to borrow more to buy property which....

Now why was anyone surprised by the bust? It all sounds like some fantasy perpetual motion machine.

I cannot see why anyone who got caught up in all this is any more deserving of sympathy than someone who went broke gambling on horses.

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Property: Negative equity severe threat to NI’s recovery

http://www.belfasttelegraph.co.uk/business/news/property-negative-equity-severe-threat-to-nis-recovery-30405324.html

Case study: 'They demanded money that I didn't have'

http://www.belfasttelegraph.co.uk/news/local-national/northern-ireland/case-study-they-demanded-money-that-i-didnt-have-30405885.html

Another couple, Laura and Alistair Bushe of Ballywalter, are "riding it out" until the value of their house returns to its purchase level of £165,000 at the peak of 2007.

Laura said not long after they bought their home prices soared to £200,000 – but its value has since fallen to around £100,000.

"We are happy here so we'll just wait until the price goes up, so it's just a waiting game," she said.

Good luck with that.

Edited by Shotoflight

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Property: Negative equity severe threat to NIs recovery

http://www.belfasttelegraph.co.uk/business/news/property-negative-equity-severe-threat-to-nis-recovery-30405324.html

Case study: 'They demanded money that I didn't have'

http://www.belfasttelegraph.co.uk/news/local-national/northern-ireland/case-study-they-demanded-money-that-i-didnt-have-30405885.html

Another couple, Laura and Alistair Bushe of Ballywalter, are "riding it out" until the value of their house returns to its purchase level of £165,000 at the peak of 2007.

Laura said not long after they bought their home prices soared to £200,000 but its value has since fallen to around £100,000.

"We are happy here so we'll just wait until the price goes up, so it's just a waiting game," she said.

Sure it's only six years of consistent 10% per year rises, and you'll be looking good. Just think - Rolf will be out and about by then.

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So the property bubble was inflated by those who took advantage of the increase in prices to borrow to buy property which further inflated the bubble which allowed them to borrow more to buy property which....

Now why was any surprised by the bust? It all sounds like some fantasy perpetual motion machine.

I cannot see why anyone who got caught up in all this is any more deserving of sympathy than someone who went broke gambling on horses.

I believe the scientific term is a circle jerk

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So the property bubble was inflated by those who took advantage of the increase in prices to borrow to buy property which further inflated the bubble which allowed them to borrow more to buy property which....

Now why was any surprised by the bust? It all sounds like some fantasy perpetual motion machine.

I cannot see why anyone who got caught up in all this is any more deserving of sympathy than someone who went broke gambling on horses.

It took a special task force report to figure it out too. Incredible. The gambling bit is spot on. Was told today that our councils are reluctant to prosecute or fine LL's for non registration, failure to protect tenant deposits or for not having gas safety records. The reason? "Well so many of the LL's are struggling with negative equity and in financial difficulty. They do a hard job, you know."

Really?

Nobody forced them to buy or to become LL's. Ludicrous that we are expected to have sympathy. Like you said yadayada, they are gambler's,the perpetrators of hpi rather than the victims of hpc.

I believe the scientific term is a circle jerk

:)

Edited by little fish

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The landlords have been facilitated by Government policy and huge numbers of 'amateurs' tempted to engage. Low interest rates, not building social housing, trashing pensions, tax breaks, Rates discounts, housing benefits providing a floor in income (paid direct to the landlord), Support for Mortgage Interest (SMI), Government supported forbearance and a reluctance to reposess, Help to Buy etc. feed into the actions of the public and policy encourages home ownership (with attendant stamp duty reciepts) as it is an asset on which debt can be gained to boost confidence and 'the economy'.

Mortgage debtors must be protected at all costs, Cameron has repeated this ad nauseum and by action. All others, the prudent, the young, savers are arbitrage and collateral damage and an election looms. Bleedover from the Republic's attitude to debt and houses did not help.

NIHE/DSD income from the right to buy scheme may have coloured their view and this income stream (taken for granted?) impacted on and influenced future spending plans. On the other hand, Housing Associations were paying £170k for ex NIHE houses now going for around £50k and were also buying into other new build estates. How badly have these organisations been burnt and how positive, or otherwise, was their role in respect of inflating prices?

No doubt brokers, finincial advisers, EA's (and word of mouth) advised people of this route and banks facilitated with niche (and broad) products and lax lending (IO, self cert) and checks. The taskforce should examine current and previous policies, including encouraging home renting/ownership through the DSD sub prime co-ownership scheme before drawing up further policies to mitigate the results of their previous, obviously disastrous, approach.

Apportioning blame however, and learning the lessons that would go with this approach, is presumably off the agenda given the membership (banks & other lenders noticable by their absence) of the taskforce and whilst the report is certainly an eye opener, it would have been much more robust and effective if representation and terms of reference were wider.

The report appears to be a 'sit rep' or a 'We are where we are' report - used where parties want to move on and disregard an uncomfortable past - rather than apportioning blame (cuase and effect) where it is due, though it has to be said a large portion of blame lies with those that were greedy and didn't know, or care, what the impact of their actions could be - even with transactions signed off, and encouraged by banks, solicitors, EAs and crucially government policy (mortgage debtors and developers alike).

Pension funds investing in property, sales to those from other jurisdictions and the roles of credit unions and the likes of the PMS would be worth a look and of course the financial, reputational, emotional and social cost of this disaster zone would be illuminating. The role of the media is another crucial facet. At present the whole rotten fiasco is too much of a dirty little secret where many were involved but are now lying low, ashamed and embarassed (wishful thinking, perhaps) by facilitating or partaking, hoping it will all blow over if we just wait long enough, ostrich like - until the next time. Or, God forbid, govt meddles further.

Most members of this forum should not be surprised, even after a period of 'consultation' where the vested interests will make their voices heard loudly, that any recommendations emanating from this report will be for the benefit of "the housing market" as a whole where those involved with a financial interest are as guilty as the gambling public of viewing houses as units or assets rather than homes and where the needs of society (social development) are subjugated to the needs of business, the reckless, the feckless and the greedy. Further house price falls will not be on this taskforce's radar, which they would probably see as a disaster rather than a necessity. They will probably conclude more affordable housing needs to be built. And the report will then gather dust.

The members of the Taskforce are drawn from:
  • Department for Social Development,
  • Department of Justice,
  • Council of Mortgage Lenders,
  • Consumer Council NI,
  • Housing Rights Service,
  • Northern Ireland Housing Executive,
  • The Law Society,
  • Royal Institute of Chartered Surveyors,
  • Landlords Association NI and
  • Queen’s University Belfast.

I was half joking earlier when I stated HPC didn't get a mention. The taskforce members could do a lot worse than skim this site - for balance, if nothing else.

The Channel 5 show "Can't pay, we'll take it away" would also prove informative in relation to the lengths people will go to to cling on to cars, boats and houses that they cannot (or will not) pay for, and which therefore do not belong to them. The odd hard luck story, but the word "insurance" against illness or job loss for example, rarely makes an appearance.

Edited by Shotoflight

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Good post Shotoflight. but have you any suggestions on what to do with/for the 41% of people who took out mortgages since 2005 who are in low or negative equity? By definition this includes those in 2007 who had less than 50% Loan to Value in their houses.

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Good post Shotoflight. but have you any suggestions on what to do with/for the 41% of people who took out mortgages since 2005 who are in low or negative equity? By definition this includes those in 2007 who had less than 50% Loan to Value in their houses.

Take responsibility for their own actions. And perhaps learn from it, as others should.

i'm afraid I don't have all the answers. I do know I was in the market to buy a house during that period but, presumably like many others, didn't (perhaps more due to luck and circumstance than judgement).

I wouldn't like to be in that position - neither would I expect the taxpayer or govt policy (at the expense of others) to bail me out or to be saved by another bubble and wave of unfortunates.

Perhaps the only answer is stability, a change of mindset and responsible govt actions and policies. And perhaps this is totally unrealistic.

Edited by Shotoflight

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Take responsibility for their own actions. And perhaps learn from it, as others should.

i'm afraid I don't have all the answers. I do know I was in the market to buy a house during that period but, presumably like many others, didn't (perhaps more due to luck and circumstance than judgement).

I wouldn't like to be in that position - neither would I expect the taxpayer or govt policy (at the expense of others) to bail me out or to be saved by another bubble and wave of unfortunates.

Perhaps the only answer is stability, a change of mindset and responsible govt actions and policies. And perhaps this is totally unrealistic.

Very True.

The problem faced is either enforcement or some sort of 'right sizing'. The latter will grind with those of us who have paid down mortgages over the last 10 or 15 years. Rising prices will help these people to move but at the same time rises will be slow and long.

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