NI housing market ‘dysfunctional’, says Stormont-backed taskforce

Negative equity rates are much worse in Northern Ireland than elsewhere in the UK.

The Northern Ireland housing market remains “dysfunctional” and poses a risk to economic recovery, a Stormont-backed taskforce has concluded.

The taskforce was appointed by the Social Development Minister Nelson McCausland.

It was asked to examine the impact of negative equity and repossessions.

The taskforce has warned that the number of people falling behind on their mortgage payments could increase as interest rates begin to rise.

The taskforce is now undertaking further work aimed at developing policy recommendations.

Northern Ireland suffered a huge housing bubble followed by a crash that saw prices fall by almost 50%.

As a consequence, rates of negative equity are much worse than elsewhere in the UK and repossessions have also increased.

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.

The taskforce said those lenders have shown “a more tenacious approach to arrears management”.

However, it said, in general, lenders have shown “forbearance” and if they had not done so rates of repossessions would be higher.

The taskforce warned that, despite a gradual recovery in the Northern Ireland economy and the housing market, major risks remain.

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”.

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

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