Mortgages an Executive issue
After the boom and crash in the property market in recent years, the current very slow growth in house prices here might seem to be ideal. Certainly no one wants a return to the early Noughties when prices soared virtually out of control only to slump equally quickly, leaving many home-owners in negative equity.
But the fact that recovery in the property market here is well below the UK average is also storing up trouble for the future.
Mortgage interest rates have remained low in recent years but are expected to begin rising by 2018 and that, according to an independent think tank, will leave one in six home-owners as mortgage prisoners, unable to get the most competitive loans because of the lack of equity in their properties and the high proportion of income that they currently devote to paying off existing loans.
This is a problem which the Executive must bring into sharp focus in its economic planning. To have such high numbers of home-owners facing potentially disastrous increases in their mortgage payments could deliver a serious blow to the property market.
On the upside, low house prices make Northern Ireland a desirable place to live and with business start-ups at record levels, that shows a growing confidence in the economy and will go some way towards correcting the historic public sector imbalance in employment. For those buying a property now for the first time, there is no doubt that they can get a bargain, but we cannot forget those who face a less certain future.
Mortgage lenders recently made it more difficult for people to get a loan and that will certainly hinder those struggling to remortgage in the hope of getting more affordable rates.
The Executive will have to consider if there are any ways of easing the pressure on the potential mortgage prisoners before their burden becomes intolerable when interest rates really begin to bite.