David Higgins

The Celtic Tiger saw a splurge in easy money. If you wanted a loan, you got it! For a car, boat, house, or TV, it was a free for all. Now the banks are out of cash and everything we bought is worth nothing!

The principal of credit is an admirable one. It allows people to get what they want and pay for it later.

However it does not come without a price. Interest is usually applied on a loan but there can be greater consequences.

For some weird reason Shakespeare knows our world better than we do! He saw these consequences quite clearly and many of his great plays detail them.

In 3rd year we studied The Merchant of Venice. This entire play revolves around a loan. The Jew, Shylock, seeks his revenge over Antonio by causing him to default on his loan. Today in Ireland you get sent to jail for this (in the most extreme of cases), but in those days you were removed of a pound of flesh!

Shylock is like a relentless bank that will stop at nothing to get its money back. At least in those days you knew the forfeit of the loan. During the Celtic Tiger the bank told you nothing and the government said that prosperity would last forever!

Even in Hamlet, which I now study in 5th year, the writing is on the wall that loans are to be avoided at all costs.

Neither a borrower nor a lender be;
For loan oft loses both itself and friend,
And borrowing dulls the edge of husbandry.

It ruins marriage, you lose friends, and most importantly you can lose everything you own!!!

This crisis has been the wake up call us Irish need.  China, who’s population save a large % of their income, is much better placed to deal with recessions like these. Thankfully some of us are taking the message seriously.

40% of adults are now debt free

This good news story shows that Irish people are beginning to save, but for how long?

If we see a boom again will personal spending rocket and will the loan cycle begin again?

It needs to be stopped and people need to realise that living within their means is the best way to live.

The American dream is quite simple. It’s only complete if you own a house. Renting is inferior and there’s no greater feeling than paying off your last mortgage payment in your 50s. The Kids have moved out and you and your spouse can enjoy retirement in peace with no financial worries.

The Celtic Tiger born Irish dream was quite similar. It also required that you own a house and renting was a frowned upon immigrant activity. Funny how things had changed from the days where up to 10 Irish guys would rent out flats in London during the 1980s.

As a result of this ‘own a house binge’, people paid huge prices for houses they couldn’t afford. They took out 40-year mortgages that they will be paying back long after they’re retired. Now most of these properties have devalued and many people find themselves in negative equity.

Today it was announced by property site daft.ie that rent prices nationwide have dropped by 15-20%. The highest drop was in Dublin of 20%. This compared with a fix rate mortgage is a huge saving and compared with a tracker or flexible rate it is still a substantial difference.

During the Celtic Tiger rents were high due to the lack of demand however it surprises me that people didn’t do so in order to avoid dangerous mortgages. People knew the property market was going to the wall yet people still threw fuel on the fire. It would have made perfect sense to rent in the past 5 years as all indications were that the prices would eventually go down.

Agencies like the Financial Regulator not only failed in “Regulating” the banks but their personal finance ads made famous by the quote “I don’t know what a tracker mortgage is” failed in advising consumers about the impending implosion of the property market.

This drop in rents is good news for consumers and a welcomed bad news for landlords who made millions on rents during the celtic tiger. The drop is due to greater competition and an increased demand for renting. It’s also good for those wishing to find accommodation for college and for those getting their first house or apartment.

However it a slap in the face for those conned in the so called prosperity of the past few years.