4 ms·

It is bad advice to simply say, "never take a repayment moratorium" based on anecdotal advice from one very particular set of circumstances. First of all, many

It is bad advice to simply say, "never take a repayment moratorium" based on anecdotal advice from one very particular set of circumstances. First of all, many people simply do not have the liquid assets (or any assets) to pay their mortgage while not receiving income. Many Italians who are not able to earn money during this period simply would not have been paying their mortgage regardless of a repayment suspension. So banks may as well get out in front of that rather than waste time sending hundreds of thousands of notices to people who are not able to pay. This is not a choice. Obviously if you can continue to pay your mortgage you should do so. Second, there is a big difference between temporarily suspending repayment for 2? 3? months and what happened after Katrina where many people had stopped paying for many months or years. There is no way that a few months repayment holiday, even if interest does accrue during that period is going to push many mortgages into negative equity. Third, Italian mortgages are absolutely capped at 80% LTV and many banks are more comfortable at 60% or even less. This is unheard of by American or UK standards but a consequence is that it would take years of repayment suspension and interest accrual to push into negative equity. Fourth, negative equity is only relevant if you want to sell. Italians tend not to be super mobile anyway, so even if some people do spend some time in negative equity, only a subset of those people will be "stuck" and prevented from making a move they would otherwise make.

fortran77 7y ago
Also, with Katrina, houses were damaged and many lost a lot of value. Here, the houses are fine.
tialaramex 7y ago
The UK essentially got rid of crazy 100% mortgages. You can still get a 95% mortgage, which is pretty desperate, but the rates on them are punishing, I haven't seen anybody say "Oh I saved 5% for my deposit now I can buy a house". If you need a 100% mortgage now, all the big banks will tell you either to go away or talk to a specialist. The specialist will explain that there's basically no legal way to sell you a product on which obviously if anything goes wrong you default and lose everything but if you can find a guarantor that'll eat the risk that's an option. The guarantor puts up capital (maybe your parents offer the home they've paid off) and if the mortgage fails that capital will pay for it. So you essentially don't have a 100% mortgage, you've got an 80% (or better) mortgage against two properties, but if things do go badly wrong you aren't going to ever talk to your parents again. 75% mortgages are pretty common here. 80% is definitely more common than 60% but things are much better than they were when idiots thought prices could only go up.
- siquick 7y ago
  > The UK essentially got rid of crazy 100% mortgages. You can still get a 95% mortgage, which is pretty desperate, but the rates on them are punishing, I haven't seen anybody say "Oh I saved 5% for my deposit now I can buy a house". I can think of 3 people off the top of my head who have a 95% mortgage. It's far more common than you think, especially in areas in the North where you can get a decent property for less than £200k (95% loans are capped at £400k)

fortran77 7y ago

Also, with Katrina, houses were damaged and many lost a lot of value. Here, the houses are fine.

tialaramex 7y ago

The UK essentially got rid of crazy 100% mortgages. You can still get a 95% mortgage, which is pretty desperate, but the rates on them are punishing, I haven't seen anybody say "Oh I saved 5% for my deposit now I can buy a house". If you need a 100% mortgage now, all the big banks will tell you either to go away or talk to a specialist. The specialist will explain that there's basically no legal way to sell you a product on which obviously if anything goes wrong you default and lose everything but if you can find a guarantor that'll eat the risk that's an option. The guarantor puts up capital (maybe your parents offer the home they've paid off) and if the mortgage fails that capital will pay for it. So you essentially don't have a 100% mortgage, you've got an 80% (or better) mortgage against two properties, but if things do go badly wrong you aren't going to ever talk to your parents again. 75% mortgages are pretty common here. 80% is definitely more common than 60% but things are much better than they were when idiots thought prices could only go up.

siquick 7y ago
> The UK essentially got rid of crazy 100% mortgages. You can still get a 95% mortgage, which is pretty desperate, but the rates on them are punishing, I haven't seen anybody say "Oh I saved 5% for my deposit now I can buy a house". I can think of 3 people off the top of my head who have a 95% mortgage. It's far more common than you think, especially in areas in the North where you can get a decent property for less than £200k (95% loans are capped at £400k)