The flagging state of the housing market is serious enough to threaten Northern Ireland’s economic recovery, a taskforce on the impact of negative equity and repossessions has warned.
Householders left with the legacy of negative equity — a level nearly five times more than the rest of the UK — are now being asked to help the Stormont body find ways of assisting those blighted by oppressive mortgages.
Initial findings of the Repossessions Taskforce, unveiled yesterday by DSD minister Nelson McCausland, were produced with the input of a range of experts, including housing and consumer rights bodies, academics and mortgate industry representatives.
The taskforce warned the housing market remained “dysfunctional” and that the number of people falling behind on their mortgage payments could increase as interest rates begin to rise. The experts concluded that Northern Ireland’s economy “remains some distance from reaching escape velocity”' and that borrowers are “poorly equipped to absorb future income shocks”.
The view follows recent figures which calculated that 41% of mortgages taken out since 2005 were in negative equity, compared to 8% for the UK as a whole.
Their findings will form the basis of a second phase aimed at “potential mitigating actions” and policy recommendations by the end of this year.
The task force was established in an effort to alleviate the financial strain of householders, who at the height of the housing boom in 2007, paid nine times their average salary for the roof over their heads.
Payments for such inflated house prices took up an average of 64% of borrowers’ incomes.
“The artificially inflated and unsustainable nature of the market has led to a crash which is unprecedented in its severity,” the taskforce noted.
Following the bubble, the legacy of the slump means Northern Ireland is now the least expensive region of the UK and house prices remain 50% below their peak seven years ago. The paper found that borrowers here were “credit hungry” and ‘took advantage of the availability of cheap credit” to spend on home improvements or to finance buy-to-let properties.
A major “at risk” group identified by the taskforce are households who undertook “equity release” remortgages at the height of the market.
The body said those lenders have shown “a more tenacious approach to arrears management”, but that lenders’ general “forbearance” had kept repossessions lower.
Mr McCausland said: “Although the housing market is showing signs of stabilising, the position of many borrowers, households and communities continues to be blighted by negative equity, repayment arrears and the risk of repossession.”
The minister encouraged those affected to contribute to the next phase of the process, adding help was there to support families under strain.
In 2007, 74% of remortgaging in Northern Ireland was for equity release.
The borrowers, according to the findings, “were disproportionately active in NI”. The data highlighted that while recent improvements are evident in the English market, “the NI landscape continues to be shaped by the legacy of the dramatic rise and fall in house prices”.