House prices have risen
dramatically from the mid 1980s until recently in Ireland, Spain, the United
Kingdom (UK) and the Netherlands1.
Indeed, the UN Special Rapporteur on adequate housing has recently stated that
market-based housing finance has contributed to a widespread bubble in real
estate prices and a decrease in affordability across many parts of the world. The subsequent financial crisis
and property price crash in many countries has resulted in significant levels
of mortgage arrears, negative equity and repossessions by mortgage lenders.
This chapter examines the
situation regarding mortgage law in Ireland
and England in the context of this housing crisis.
While these two countries are somewhat unique in European in that they both
have a common law legal tradition, supplemented by statutes, there are also
significant differences in the approach of legislators and the courts. In both
countries, a mortgage is regarded as a property right. A mortgage is a “real
right in land created by the owner (mortgagor) entitling the mortgagee to
payment of a certain sum out of the land with priority to other creditors on
the forced sale of the property”.
There are important similarities too, in terms of housing, with
both countries experiencing sustained house price inflation up to 2008. The
extension of credit in an inflationary context, based on inexpensive capital
from increasingly integrated global and national capital markets created a
major house price bubble. The bursting of the house price bubble led to a
reversal of house price trends and exposed an indebtedness crisis amongst
national mortgage consumers, manifest by increased arrears and repossessions.
However, the scale of arrears in Ireland is more significant than in England,
although the rate of repossessions is lower. The question arises as to whether
difference in the extent of arrears and repossession is linked to differences
in the national legal framework applicable to mortgage consumers. In Ireland
and England, the rights and protections of mortgage consumers are contained in
a variety of constitutional provisions and, primary and secondary legislation.
This chapter identifies the nature and scope of existing frameworks in both
markets. It also examines the comparative status of the mortgage consumer under
contemporary national provisions.