tag:blogger.com,1999:blog-8817171247555815363.post6781600758970449227..comments2024-03-26T05:57:44.937+00:00Comments on True Economics: Economics 21/06/2010: Innovation economy - Irish Banks' StyleTrueEconomicshttp://www.blogger.com/profile/07350536454228478974noreply@blogger.comBlogger5125tag:blogger.com,1999:blog-8817171247555815363.post-64879424637063473942010-06-23T11:10:48.448+01:002010-06-23T11:10:48.448+01:00I find this post somewhat below your usual high le...I find this post somewhat below your usual high level of insight and rigour.<br /><br />"Of course another amazing thing here is that after all the talk about barring 100% mortgages, the new product will push more vulnerable households into mortgages multiples of the 100% leveraging. Happy times are just around the corner folks."<br /><br />It may do that.<br /><br />More likely, and given the reporting I have seen almost certainly, it won't "push" anyone into anything of the sort. The negative LTVs exist and a renogatiation of the debt won't change that. <br /><br />You might have €100,000 in negative equity before, you will have €100,000 in negative equity afterwards.<br /><br />What you don't seem to comment on is that at the same time you might have:<br /><br />€600,000 gross debt before and have, say €400,000 gross debt after (in the case of someone wanting to reduce their debt and debt interst burden).<br /><br /><br />Or, you might have a disposable income fo €3,000 per month before and a €3,500 per month disposable income after (for someone who has an opportunity to relocate to a better job). <br /><br />The response from the Financial Regulator on this news is sound - too much debt, negative LTVs are bad for all concerned and should not be countenanced if sound risk management is your objective.<br /><br />But, the negative LTVs exist. Fact. With proper oversight and jusicious application this idea could be a good idea for some households.<br /><br />The best thing about this is that it is not a "government initiative" and it (for obvious reasons) opens a potential avenue in selected instances for a bank-household win-win.Geckkohttps://www.blogger.com/profile/08622738390027791575noreply@blogger.comtag:blogger.com,1999:blog-8817171247555815363.post-36427419230723853482010-06-23T11:05:46.497+01:002010-06-23T11:05:46.497+01:00From the spreadsheet - "Property value today&...From the spreadsheet - "Property value today"<br /><br />How will this be worked out? Will they have to sell it first to find out?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8817171247555815363.post-42321279818268988652010-06-22T05:58:36.039+01:002010-06-22T05:58:36.039+01:00Mack, you are right. I assume decline of 42% of as...Mack, you are right. I assume decline of 42% of asking price and 5% closing cost - original stamps are counted separately. That's on the value of the house. So you are right vis-a-vis the mortgage, the negative equity is 124,500. But the losses on the house are correct. The end number changes - see updated table. And thanks for spotting the error.<br />C.TrueEconomicshttps://www.blogger.com/profile/07350536454228478974noreply@blogger.comtag:blogger.com,1999:blog-8817171247555815363.post-65415972837159444252010-06-22T01:07:50.826+01:002010-06-22T01:07:50.826+01:00These are pure working examples of micro and macro...These are pure working examples of micro and macroeconomy of D. Begg. I wish, Ireland would realize, that is acting in real open economy not in scheme drawn on paper. Being fed up with semi concious statements provided by autorities, observing significant negative leverage occuring current economic climate I doubt with any artificial growth "promissed".Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8817171247555815363.post-49142199896635495732010-06-21T22:57:37.972+01:002010-06-21T22:57:37.972+01:00Am I getting something wrong here, folks?
Yep, I ...<i>Am I getting something wrong here, folks?</i><br /><br />Yep, I think so. An arithetic error in there I think. They're €124,500 in NE not €224,500. So the total loan for the second house should be around €440k. 140% or so LTV.<br /><br />Also the costs might be overstated. Presume that's including stamp? They might avoid that by purchasing a new home somewhere. <br /><br />And also possible that families and the like might move further out (i.e. sell a townhouse close to the centre of the town they live and head for the suburbs) - so the new home (for some) may not be more expensive than their existing one.Macknoreply@blogger.com