Despite the huge media attention on big developers who owe us squillions, the capitulation point in this property burst hasn’t happened yet. So far Ireland’s domestic and foreign banks have been consumed with saving themselves, repairing their capital and reconstructing their business models. But watch this space because we ain’t seen nothing yet.

The real squeeze hasn’t started. Once NAMA is underway, banks will begin to pursue distressed debt with vigour as teams of salespeople morph from zealous sellers of debt to pernicious debt recovery agents. Everybody will be targeted and not just developers but anybody finding it impossible to meet repayments on car loans, mortgages, overdrafts, credit cards and any other type of debt. Meanwhile much larger numbers of borrowers will tip over into the debt trap as their spare cash burns up attempting to bridge the yawning gap between much lower income or the dole and, debt demands. Government better pray for a slow European recovery especially in Germany because as it gathers pace, interest rates will start rising sharply. It’s as ugly as it is inevitable. 

In the big squeeze those sitting on property with rolled up interest or capital repayment holidays will be greeted by the born again banker – and there is nothing worse than the convert. This is the banker who survives the imminent wholesale job losses among staff and is now freed up from the chaos of restructuring, with strict instructions to get in as much cash as possible. So far banks have stayed their hand in forcing property sales at any price for fear of bringing their own house down around them. But once rescued by the public purse, that tactic will change dramatically triggering a capitulation point in property prices and finally heralding the real bottom of the market as supply surges on to it. Recent comments by some auctioneers that we’ve reached the bottom, is self serving propaganda. These are the same people who that told us prices would keep rising even when starter homes hit ten times average wages, a discredited self regulated profession of chancers hoping to return to the good old days when what they had to say dominated social discussion and paid them handsomely. You can safely file their predictions under The Bermuda Triangle, Elvis-is-alive and Area 51 as pure Sci-fi. 

The recent adoption of a code on mortgage foreclosures, delaying repossessions for twelve months is a welcome relief but it doesn’t protect all other types of debt. The great difficulty in Irish law is the unequal relationship between borrowers and lenders. Recklessness by one party can be subject to jail as 276 people learned in 2008. Recklessness by the other leads to a public bailout. Borrowers get punished. Bankers get rescued. That jail is the ultimate weapon of the lender is sheer stupidity. Putting people in jail doesn’t repay debts. The problem is that the Courts, relying on Dickensian laws that are a hangover from the days of Poor Houses, have no other option. What’s needed is an equalisation in the relationship. If a Judge finds that debt has been mis-sold by lenders, especially by sub prime parasites, he or she should have the authority of modern legislation to strike out the debt or to redraw the terms so that the borrower can manage. Such legislation, balancing consumer rights with bank rights, would beat overhauling regulatory boards hands down.