Investigating stories affecting life in Northern Ireland. Ciaran Tracey examines the negative equity crash and the quiet deals the banks are doing to try to write it off.
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now, many of us are bust. Homes bought at the peak of lost more than
50% of their value. The middle-class is bust.
Five years ago, people here broke off �8 million in bankruptcies. In
2012 it was closer to 1 billion. I don't want to go bankrupt.
Record numbers are filing for insolvency and the rate here is
writing faster than anywhere else in the UK.
You've got just over �11,000 worth of debt and that will take you nine
years to pay off. But not everyone is facing live in.
They are finding the banks can shrink their debt.
If you are running a bank, you are not going to be advertising it.
Our finance minister says Northern Ireland's biggest bank is making it
worse. Unless we are going to do something
radical, we are going to be completely inadequate. The debts we
have racked up are strangling our economy and there could be worse to
self-employed plumber, trying to make ends meet. He's got a big
mortgage but little work. This year is slow. I'm pricing a lot
of work but there are so many boys pressing against you and its
Like many people, Gary and his wife Louise bought a house at the height
of the boom in 2007. What is the job today? Power flush.They took out a
massive interest only mortgage. That has become a problem because work is
scarce. Everyone has been led to believe that you have to have a
house and this didn't happen overnight. I think it is British
culture. We were taught that you can't lose rix and water -- bricks
and mortar. Gary's problems are to do with his mortgage problems. He
hasn't wrapped up debts through credit cards or other loans. He is
trapped. He can't sell his house because it is worth less than he
paid for its mortgage. He is in negative equity. Just to put it in
perspective for us, roughly how much did it cost when you bought it.
has cost 240 and we took a mortgage for 190. So you have a mortgage for
190. 190 plus arrears so we are not far off 200. What is the latest
estimate of what the house is worth? One of the houses in the
street sold for 115 recently. that is �75,000 negative equity.
His problems began when his wife had to leave work after developing
breast cancer and had to leave. It meant the family income was cut.
thought, everyone told me we'd be OK and we would a payment break will
stop it was in the contract. She was seven months out of work before she
went back to work. They just said no because of the negative equity.
loss of income coupled with the downturn in Gary's business has
meant the family couldn't cope with the mortgage and they have given up
even trying to make their monthly payments. You have gone into
arrears? I am baked into arrears.It means the company that gave him the
mortgage could repossess Gary's home but that wouldn't mean he would be
free of the debt. If there was repossessed, he would still owe what
was left on the mortgage she took out. Gary doesn't know what to do.
It does get on top of you. Does. We are in the position to move and we
have done it. We didn't know this would happen.
Gary's situation is the story of Northern Ireland in 20 2013. Houses
have plummeted in value. There is a lot of water and of the bridge since
then. As prices have fallen further than anywhere else in the UK. Down
over 50% from the peak. It has been up to charity workers to deal with
the pain that it has caused. This is the man on the street, this
is every third person you meet. Depending on what their
circumstances are, what they were working at when things were good and
there was a lot of money and a lot of jobs and overtime, people did
chase the dream. With the collapse of the economy in recent times, in
the recession, a lot of people are left very overcommitted.
Gerard shares his workplace with citizens advice, which has seen
rises in people seeking help for debts. This is one of Northern
Ireland's debt hotspots. The number of people coming through its doors
have quadrupled over the last four years.
Probably the biggest amount of debt back then would have been 3000 or
�4000. We would have seen debt rise from the average amount of debt
could be �100,000 per person. Especially if you see people with
maybe two cars, a home and perhaps a second home they are renting out. We
have found where many have gone from thousand pounds income a week to
just a couple of hundred pounds. What is your reaction to people
saying they are �100 in debt? Typically, it doesn't raise and
eyebrow. They are recommending in many cases
that people declare themselves insolvent. Over 3200 people declared
themselves officially broke last access to the figures that show the
true extent of this problem. In the last two years, just under �1.7
billion has been written off in personal bankruptcies in Northern
Ireland. There are a handful of big visual losses in there but to put it
in perspective, the figure 2008 was �8 million will stop for years
later, it was almost one billion and at the heart of it is property gone
badly wrong. Across the border, a colossal amount of property debt is
being shouldered by ordinary borrowers. Is the story of
Ireland's economic collapse. But even in that context, one leading
economist there says the debt weighing on people in the Ireland is
shocking. The scale of the personal debt problem in Northern Ireland is
surprising. It is �1 billion of write-offs. It is without a shadow
of a doubt the single biggest financial issue facing the North.
How do you deal with the fact that you have almost �1 billion already
of debt written off? This is out of control.
It was a lending and spending spree that got us here but now properties
bought at the height of the market are worth nothing like they were.
Northern Ireland has seen the value of some homes cut in half.
The middle-class is bust and by that I mean it is the same in the North
as well, if you look at the balance sheet the middle-class. On one side,
the assets are houses which have collapsed in value and the liability
side of the debts of which remain fixed. And that is the personal
insolvency nightmare here. As with many in Northern Ireland, it
is a nightmare which Gary knows only too well. It has bought into the
brink bankruptcy. He is trying to negotiate with his mortgage provider
but said it is no use. Just before Christmas I realise I
had to do something done about this stop I type 2% to negotiate with me
but I am dealing with a call centre and they are just reading a script.
They can only answer using the script.
There are few answers. Financial advisers tell him to get himself
insolvent but he still doesn't want to do it.
Three financial advisers told me to walk away. What does that mean? Hand
the keys in and start again. I want to still do a deal. I want to keep
the house. I don't want to go bankrupt. That is the last thing I
want to do. For the majority, bankruptcy is a
life changing event. Being insolvent ribbons people's ability should
borrow and fewer people can spend. That hits the economy. It is a debt
spiral and is wobbly our finance minister. -- worrying our finance
minister. It depresses the economy further and
the more you do that the more people lose their jobs and are more likely
to become in solvent and the less money is spent so businesses find it
more difficult. And that is what is happening.
Advice worker Rosemary McDonald is finding increasing number of small
businesses going to the wall. These are people who might own the
local newsagents, a cafe, a small restaurant. They are the hardware
shop owners. The ideology is a after a year we are all right. These
people were never set up the game because they have been so battered
into the ground and they will not set up again.
Banks are now coming under scrutiny for the role they are playing in the
debts nightmare. There is concern that heavily indebted banks are
calling in what is into them at a time when they are supposed to be
lending will stop our finance minister believes Northern
Ireland's display is especially aggressive in trying to balance its
books. In some circumstances, in order to
try and repair the balance sheet, they were going after those
companies who were most likely to be able to work their way out of debt
if they were given time and saying, we want it from you now. There is an
asset which is earning you money at present. So it and get rid of it. If
us the money for it. Ulster bank says it can't lend
indefinitely to businesses which it believes aren't viable. However, our
finance minister has a radical suggestion for Ulster bank. He wants
it to be broken up and its bad debt - off to stop it squeezing hard up
clients for cash. They do have bad property loans. If you want to have
a being able to operate as a viable bank then you have got to somehow
separate out these bad property loans which strike their profits
down every year. It is a radical solution. Unless we do something
fairly radical we are going to stumble along with a banking system
which is totally inadequate. Given the importance of Ulster Bank to the
economy, that is going to curtail economic growth in the private
sector very badly in the future. future is a long way off for the
many people struggling with debt in Northern Ireland. They want rid of
it. The cleanest break is often to just go bankrupt.
Good morning. This person works for a charity
which shows people what to do when they get over their heads in debt.
There is not a typical person. she has agreed to bring us on a
visit to a client who has racked up a serious amount of debt, not
through property, but through credit cards and payday loans and has
decided to declare herself insolvent.
I had to give everything up. I have had to sell things. I had to pawn my
camera. How much did you get for it? �50. You had to pawn your camera to
buy food? Yes, but you have to eat. Her situation means she must hear
stark advice. You have got �11,000 worth of debt. That will take you
nine years to pay off. We do not believe that is a realistic time to
live on a tight budget. Our advice is contained in this letter. We
suggest our debt relief order. Uptake of debt relief orders is
rocketing. It is a new kind of mini bankruptcy. There are strict
conditions. It is for people who get off under �15,000. It is quite a
quick way to become debt free. It works very well. This person says
her debt relief order means she can pick up her life the past it. - -
free from past debt will stop - -. can start living again. I will feel
better about myself. I hear, and a meal. I do not want at things. - - a
haircut. But these arrangements are not suitable for bigger debts such
as mortgages. This adviser says he has never been easier. He aims to
keep people out of bankruptcy. typical client will have �30,000 or
�40,000 of debt. We will look at the income and the expenditure. We will
look to see if they have something available to offer to creditors,
should it be �200 per month. They pay at over five years. That is used
in full and final settlement of their debt. I have come to meet one
person who says he found life like this and tolerable. - -
intolerable. He was advised to take the IVA route. He wants to remain
anonymous. It sounded good at the time. After I year it was very
difficult to maintain the payments every month with the constant Big
Brother approach. Some of the questions went down to what you
spent on your lunch on a daily basis, what it costs to capture
here. - - what it costs to cut your ear. What pocket money you give to
your children. He said the payments were so demanding that he could not
afford them. They fell into arrears. As a consequence he was made
bankrupt a few weeks ago - the thing he tried to avoid. I spent two and a
half years in insolvency, culminating in bankruptcy. I would
never want to relive those years again. I have been declared
bankrupt. At this minute in time I feel more comfortable with my life.
I can take it forward. Other than the terrible stigma of having to
admit you are bankrupt. To sit in front of you anonymously shows that
the stigma is very real. Talking about the scale of your debts is not
just a stigma for people like him. Our politicians have been keeping
quiet about the billion pounds black hole we have discovered.
In the south this is the daily talk. In the north you could swear that
none of this is happening. Why would I inject into the economy of
Northern Ireland further uncertainty and further alarm Western Mark my
job is to build confidence in the economy. If you destroy confidence
you destroy the willingness of people to spend. You destroy their
willingness to invest. You destroy their willingness to start new
businesses. You make the situation worse. I want to make the situation
better. How do you deal with the problem is big? Official insolvency
is designed to happen element of Hannah spent, but with the scale of
the debt now in the system some say that approach has to be put aside
and instead lenders should be showing what is called debt
forgiveness. You have to have debt forgiveness. The idea that you went
me money and you do no credit checks and the reason you are lending the
money is because the man over there bulb went if you do not, and I go
off, and I come back in a few years time and say I lost my job and the
house is worth 50% less, the notion that you expect to get paid back in
full is ludicrous. Sammy Wilson agrees to an extent. As our soaring
debt levels show ordinary people have little hope of being back what
they all in full. It turns out he has even told banks in Northern
Ireland he wants to see debt forgiveness. That is an issue that
they were not madly keen on as I am sure you will understand. Who steps
do you forgive? - - whose debts. But it is an issue we must increasingly
look at. Debt forgiveness means sidestepping penalties caused by
insolvency. This is something anchors refer to as our rates down.
I cannot pay it. You went too much money. Let us do a deal. End of.
At the moment who gives debt forgiveness? We asked the big banks.
Each of them said they were willing to work with customers in trouble,
but after that information was then. One bank said it is not right down
any debts. Two other banks said in exceptional circumstances they do.
The others would not give a direct answer. We found out that those
other banks are doing it, but it is done quietly and behind closed
doors. There does appear to be a discrepancy in the way banks deal
with it. In some cases people are being left alone. Others who do not
all as much but have got a viable business are being tortured.
Ironically they are the ones who can test whether the storms. Without a
clear system for testing debt forgiveness it is all about who you
know. There are people who now claim they can get it for you. It seems to
be a sensational thing to say that banks are writing off debts. For
hundreds of years banks have been writing off debts. If you are in the
moneylending game it comes with the territory. If you are running a bank
you will not be advertising that that is what you are doing. So many
people are in difficulty in Northern Ireland that this company is doing
business arranging quiet get deals with Hanks. In the Dublin office he
is working with our rogue trader who has now joined him cutting deals.
In 1995 this man was jailed for causing the spectacular collapse of
a bank. He is now based in the Republic and says it is time for the
banks to get real. At some stage banks know that these loans are
never going to be repaid. The amount that was lent is just preposterous.
They are never going to be able to recover that sum of money. Something
has to be done. But involves an element of right down.
- - of write down will stop - -. These clients are getting debt
forgiveness and the rest are not. That is probably true. If you are
willing to communicate with the bank in a meaningful manner, and it has
to be professional, there is no point walking into a bank and asking
for everything. Back in the home that has caused so much trouble with
his lender, Gary does not have so much choice.
All the debt we have is because of this. All of this is a massive
debts. Yes.How does that feel? love the house. It is hard. Gary
says he is disappointed that banks and lenders seem to have one
approach for some and a different one for others like him stop if I
had a deal like that in the next few months it would relieve so much
pressure. Is it right that some get these deals and some don't? It is
not right. They can't pick and choose who they are going to help.
That is not right. This stalemate people like Gary find themselves in
underscores the need for a system of yet forgiveness. - - debt
forgiveness. You need to have an overarching
system which speaks to the smaller people, the people who got into
negative equity because they were trying to do the right thing. The
people with 10,000, they are the economy. They make the economy work.
But it is exactly those all who may be in for one more shock. News last
week that there had been a slight increase in house prices here was
greeted as a sign that horrors might be starting the journey out of
negative equity. - - that borrowers might be starting.
They have six years to pursue that. I suspect what they are doing is
waiting to see if and how the circumstances of the client will
improve in order that they may be a chance that they may get some of the
money back. This insolvency worker agrees. He says he has seen the
unfortunate consequence of recovery before. There will be an increase in
insolvencies. It will be six months after we see the recovery. That is
because predators begin taking action at that stage. Hopefully not.
For those who have already felt the full force of insolvency, what they
have lost and married, they say they have gained in wisdom it is not
worth worrying about it. Do not worry about the stigma. You have to
start living again. You cannot be like me and to shut yourself away.
People say that he has lost his car. But once you have crossed that
bridge life moves on. Like so many with debt problems in Northern
Ireland Gary is living more in hope than expectation. I still hope to
Ciaran Tracey investigates Northern Ireland's personal debt crisis, examining the negative equity crash and the quiet deals the banks are doing to try to write it off.