Using figures produced by David McWilliams on the total mortgage market in Ireland and in particular on the problem of people in negative equity, I have come up with the following costs for a pretty well instant solution.
David McWilliams » The land of the financially blind
Of the 112 billion in total mortgages and based on Bank of Irelands figures, approximately 60 billion value of those mortgages are in negative equity and on average to the tune of 140% in loan to value.
The basic idea would be that the banks write the mortgage down by 50% and take a 50% interest in the property. The figures involved would be 30 billion written off with the banks getting 22 billion worth of property in exchange.
Total book cost to the banks would be 8 billion of value written off their books, they have the cash to be able to do this without any further input from the state, in addition they’d have to carry 22 billion in property assets at today’s value on their balance sheet.
The benefit to the mortgage holder would be mortgage costs immediately cut in half and a lot less stress in their lives. The costs obviously the loss of half their property, with total saving of 2.2 billion pa in mortgage repayments
The benefits to the economy would be;
Releasing, at a guess, 1.5 billion into the economy allowing for the fact that the total of 2.2 billion in mortgage savings was unaffordable in the first place.
This sort of extra spend would add 1% to our growth rate and generate 8 to 10,000 jobs in the economy, giving a saving/contribution of maybe 500 million to the national budget.
I would certainly think so, but why isn’t something like this happening, where are the problems or objections?
On the other hand maybe I made a complete balls of the figures and someone will be along to tell me so.