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Saturday 10 December 2016

Terry Prone: Tracker or variable? Mortgages are new social dividing line

Pictured posed
Pictured posed

Three Dublin people and a Kerryman were sitting around a table, having coffee.

No. This isn't the beginning of a joke. It happened, for real, this week. The four of them were meeting up because the Kerryman had buzzed off back to Kerry a couple of years earlier and - as former colleagues - they meet up whenever he visits the Big Smoke.

On this occasion, he was talking about refurbishing his home. Talking with enthusiasm. Talking with detail. Talking as if he loved every flying bit of loose plasterwork.

"Costing me an arm and a leg," he admitted. "But I sold the house in Dublin at the top of the market, thank God, and bought at the bottom, so my mortgage is negligible."

The three Dubliners looked at him with unconcealed hatred. It was a long time since any of them had heard of a "negligible" mortgage.

The fact is, these days most Dubliners are more or less defined by their mortgage.

Couples don't quite say "Hi, let's introduce ourselves and our mortgage", but it's a constant reality, particularly of nesting couples in their early thirties. Like pregnancy heartburn, mortgages affect some sufferers more than others.

One of the four discussing the Kerryman's refurb had bought their home during the boom. They are now in the unhappy position of owing a shedload more money than the other Dubliner, who bought her house five years earlier.

Mortgages have become the great social divider, hedged around with overt sympathy and concealed contempt.

The person who bought in the historic times before the housing bubble secretly believes that they were prudent and wise. They knew the importance of property in any Irish citizen's life, got onto the property ladder early, and so - they believe but have the wit not to say out loud - they are now in what they infuriatingly describe as "reasonably good nick".

The person who was having a grand life before property prices began to accelerate and who waited to buy for various reasons, not all of them in their control, now feels like a complete plonker.

But they also remember the pressure, the sense that although the house or apartment they were planning to buy was too small for expansion and too expensive for sanity, they'd better get hold of it before it doubled in price on them. It was that crazy, back then, and anybody who suggested that maybe the couple could rent until prices fell back to something reasonable was looked at as if they were touts selling dodgy tickets.

Couples had a choice, as they saw it, of buying in furthest Ashbourne for an OK price or buying in Ranelagh or Clontarf for an outrageous price, and they went for the Dublin locations.

These days, as a result, they don't say much to anybody about their crippling mortgage and they console themselves that commuting from Ashbourne would be worse than being financially strangled.

Not only is there a crucial divide between people weighed down by huge mortgages and people with a more manageable monthly payment, but there's another crucial divide between families on fixed or variable rate mortgages and those on trackers.

envied

At a time when we're all bored listening to economists talking about how low interest rates are, worldwide, some 300,000 Irish homeowners on variable rates pay 4.5pc interest on the borrowed sum, which is up there among the most expensive in the EU.

That means they pay as much as €6,000-a-year more than people (their neighbours, their friends, their siblings) on tracker mortgages. People on trackers are sitting pretty because their rate has followed that of the European Central Bank down to record lows.

So the people who bought their house pre-boom are envied by people who bought their house at the top of the market, and the people on trackers are envied by people on punitive fixed rate mortgages.

A mortgage used to be something Dubliners were happy to get and forget. Now, a mortgage is a burden and a social divider into the bargain.

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