A Happy Ending?
Visiting James and Louise this week (names changed) I was struck by how appearances can be so deceptive. Outwardly they appear to have it all; two good jobs, a lovely new home, a rental property and a nice car. They have youth on their side, make a great couple and until recently were looking forward to financially secure lives together.
Unfortunately the local property market crash caught them in a financial tsunami of devastation and they are now in substantial negative equity on both properties and struggling to make the monthly repayments on their mortgages and loans. Caught in the negative equity trap their mortgage deals are now being charged at 2% higher than the interest rates they originally signed up for, and this is causing severe financial hardship. The rent they receive on their flat doesn’t even cover the mortgage, let alone the ancillary running costs and taxes.
“Louise was really reluctant to seek help, she is hugely embarrassed about the whole thing” said James “but I just couldn’t go on any more trying to juggle with our finances”. James and Louise are two months behind on their mortgages and their lenders are already threatening repossession.
“We had been living the dream and I suppose we got carried away a bit, but nobody expected the property market to come crashing down round our ears like this” said James. “We bought our new home and were under pressure to complete quickly – so we moved before our old place was sold and ended up with two properties and two mortgages. Then the market stopped overnight and our flat has now been up for sale for over a year with no buyers making an offer”. “We ended up having to rent it out to try and recoup some of the monthly outlay we are making on the mortgage”.
Certainly more experienced investors than James and Louise have been caught out by the sudden reversal of the Northern Ireland property market which went from boom to bust in a very short space of time. Whilst a slowdown had been predicted the suddenness of the reversal shocked even the most pessimistic of market observers. Unfortunately after the property boom party of the last 16 years we have all woken up the next morning with a massive hangover to contend with – plummeting property values, negative equity and private sector economic turmoil leading to business failures, job losses and financial hardship.
Thankfully though in this case there is a strong glimmer of hope. On constructing a budget for this young couple from Bangor, Co. Down I was able to carve out enough monthly affordability to enable them to make their priority debt payments (mortgage, rates, household bills, car HP) with a surplus left over to pay a proportion of their unsecured debts. By entering into a Debt Management Plan they are able to pay all of their priority bills, contribute towards the reduction in their mortgage arrears and also make an affordable contribution to their unsecured creditors each month.
“We’ve borrowed this money and we want to pay it back” said Louise, “and hopefully the property market will improve over time and we can sell our rental property which will help our monthly budget”.
It is going to be a long haul for James and Louise and they will have to get used to budgeting carefully each month for quite some time to come, given that the local property market isn’t expected to improve for a couple of years or more. They will have to give up on any dreams of foreign holidays, an expensive Christmas and any other major expenditure, however that doesn’t mean that they can’t enjoy the occasional indulgence. I recommend people in debt management programmes treat themselves occasionally – a visit to the cinema or an early-bird dinner at a favourite restaurant doesn’t have to cost the earth and can serve to help people forget their debt problems for an hour or two.
Hopefully James and Louise will be able to go the distance and I will certainly be there for them. We will of course be setting up their debt management plan, writing out to creditors etc. and I also plan to give them some money management tips over the coming weeks to help them achieve their goal of getting out of debt and back to financial well-being. They certainly have time on their sides, and with many other people in the same situation hopefully their creditors will be realistic and give them the breathing space necessary to make a genuine effort to repay their debts.
Best of luck guys, be strong and take heart from the fact that you are not alone in suffering from Northern Ireland’s ‘debt hangover’. If you take ownership of your debt management plan and participate in it whole-heartedly then there is very good chance you are going to come through this ok.
Tis article was contributed by Patrick Bryan.
Unfortunately the local property market crash caught them in a financial tsunami of devastation and they are now in substantial negative equity on both properties and struggling to make the monthly repayments on their mortgages and loans. Caught in the negative equity trap their mortgage deals are now being charged at 2% higher than the interest rates they originally signed up for, and this is causing severe financial hardship. The rent they receive on their flat doesn’t even cover the mortgage, let alone the ancillary running costs and taxes.
“Louise was really reluctant to seek help, she is hugely embarrassed about the whole thing” said James “but I just couldn’t go on any more trying to juggle with our finances”. James and Louise are two months behind on their mortgages and their lenders are already threatening repossession.
“We had been living the dream and I suppose we got carried away a bit, but nobody expected the property market to come crashing down round our ears like this” said James. “We bought our new home and were under pressure to complete quickly – so we moved before our old place was sold and ended up with two properties and two mortgages. Then the market stopped overnight and our flat has now been up for sale for over a year with no buyers making an offer”. “We ended up having to rent it out to try and recoup some of the monthly outlay we are making on the mortgage”.
Certainly more experienced investors than James and Louise have been caught out by the sudden reversal of the Northern Ireland property market which went from boom to bust in a very short space of time. Whilst a slowdown had been predicted the suddenness of the reversal shocked even the most pessimistic of market observers. Unfortunately after the property boom party of the last 16 years we have all woken up the next morning with a massive hangover to contend with – plummeting property values, negative equity and private sector economic turmoil leading to business failures, job losses and financial hardship.
Thankfully though in this case there is a strong glimmer of hope. On constructing a budget for this young couple from Bangor, Co. Down I was able to carve out enough monthly affordability to enable them to make their priority debt payments (mortgage, rates, household bills, car HP) with a surplus left over to pay a proportion of their unsecured debts. By entering into a Debt Management Plan they are able to pay all of their priority bills, contribute towards the reduction in their mortgage arrears and also make an affordable contribution to their unsecured creditors each month.
“We’ve borrowed this money and we want to pay it back” said Louise, “and hopefully the property market will improve over time and we can sell our rental property which will help our monthly budget”.
It is going to be a long haul for James and Louise and they will have to get used to budgeting carefully each month for quite some time to come, given that the local property market isn’t expected to improve for a couple of years or more. They will have to give up on any dreams of foreign holidays, an expensive Christmas and any other major expenditure, however that doesn’t mean that they can’t enjoy the occasional indulgence. I recommend people in debt management programmes treat themselves occasionally – a visit to the cinema or an early-bird dinner at a favourite restaurant doesn’t have to cost the earth and can serve to help people forget their debt problems for an hour or two.
Hopefully James and Louise will be able to go the distance and I will certainly be there for them. We will of course be setting up their debt management plan, writing out to creditors etc. and I also plan to give them some money management tips over the coming weeks to help them achieve their goal of getting out of debt and back to financial well-being. They certainly have time on their sides, and with many other people in the same situation hopefully their creditors will be realistic and give them the breathing space necessary to make a genuine effort to repay their debts.
Best of luck guys, be strong and take heart from the fact that you are not alone in suffering from Northern Ireland’s ‘debt hangover’. If you take ownership of your debt management plan and participate in it whole-heartedly then there is very good chance you are going to come through this ok.
Tis article was contributed by Patrick Bryan.
