There’s a crash on way, but don’t worry – it won’t be catastrophic!
Who’s one of Poldark actor Aidan Turner’s best mates? You probably wouldn’t guess that it’s Paul Merriman, the financial expert behind free personal finance advice service Askpaul.ie. He wants the State to give free money to savers. The bad news is that he sees a housing crash on the horizon.
So, we’re heading for a crash? How bad will it be?
It will be more of a correction than a proper crash. This happens every 1015 years, but if it coincides with a downturn in the economy it could be very bad indeed, but not catastrophic.
But isn’t the economy going like gangbusters? What can possibly go wrong?
For starters, interest rates should start increasing from 2019. Then supply of housing will eventually outstrip demand.
How much will rates rise by and what will that mean to a mortgage?
They will rise by 0.25% incrementally. Market predictions of increases over the next decade won’t exceed four percentage points. However, if you are on a 3% mortgage and it jumps by three percentage points, that is a doubling of your rate – and a huge increase in repayments.
Surely that’s not so bad? And can’t we fix for three or five years at 3%?
Yes I recommend everyone fixes for security. Variables are more expensive than fixed.
And are we not a long way from oversupply when we’re so far behind meeting demand?
The housing supply issue will be corrected in three years. Building plans are well underway at this stage.
Can attitudes to property change so quickly?
We are obsessed with wanting what we all don’t have. But once we all have it, the obsession will stop.
So what should we do?
People need to consider leaving Dublin. The value is outside the capital.
Surely it’s better to buy than rent?
For people buying just to get on the ladder, getting a mortgage is just renting from the bank. The first five years of interest alone costs €41,934, even at a relatively low rate of 3% on €300,000.
What else is going on in personal finance?
There are 900,000 people renting in Ireland who don’t have adequate protection, such as life assurance. Then there is also the whole issue of Personal Contract Plans, which is for another day!*
What would be your top three personal finance tips?
Make a personal budget. You can’t save money if you don’t know where it’s going. Get professional financial advice. Cash is king – always save and use your cash wisely.
Your own biggest financial mistake?
I got a credit card aged 18 and asked for a €500 limit. I got a €5,000 limit. It took me years to pay it off.
And your best decision?
Working for myself.
How do you unwind when you want to get away from mortgages and money? Not by playing monopoly, I presume?
Spending time with my wife and kids.
Weirdest thing you’ve done?
A best friend of mine, Aidan Turner (the star of Poldark), invited me to the premiere of The Hobbit and I got to walk the red carpet. Awesome!
What was your most expensive fun purchase?
Caribbean cruise for four weeks with the family. Work hard, play hard.
Name three things you’d do if you were a minister.
Sort out the HSE. Budget to secure the country’s future – not just for the present. Bring back Special Savings Investment Accounts (where the Government tops up everyone’s savings by 25%). (* Personal Contract Plans are where car finance firms try to ensure drivers never own their cars with rolling financing deals. You borrow to pay for depreciation and pay a lump sum based on car’s value or start the whole thing over again. It’s a really bad idea from a personal finance viewpoint. BT)