We were asked to speak with Pat Kenny today about variable rates and the government plan to intervene to make banks drop them. This was, after considering various pieces of evidence shown to be a deeply political rather than pragmatic move. We also demonstrated that there are documents which the Minister for Finance had drafted up with the banks specifically stating that he would not intervene on matters of pricing, the recent round of ‘meetings’ is in direct contravention of that.
In the ongoing variable rates pricing fracas there are many points being overlooked. The first is why our mortgage rates are higher than other European countries, but we should just ignore that – at least to stay popular.
We’ll say that the government/Central Bank pressure works and banks drop their rates, what next?
We might get around to the greater number of people under price pressure for housing (the renters), but that’s unlikely, instead we’ll inadvertently drive up house prices a little more by making credit more easily available.
Because the lower the variable rate the lower the stress test. Lower rates equals more credit, it’s a fact of life in lending.
You heard it here first. The lower variable rates go the more it frees up a persons lending capability. We have covered the way the Central Bank lending rules won’t work to the point of being annoying (and we weren’t alone, the ESRI and …
The ongoing meme of standard variable rates being a ‘rip off’ has recently lead to a new bill being proposed by Senator Feargal Quinn. This is the most recent brainwave since the ‘tax banks to make them cut rates‘ idea.
Once again we see the politicisation of credit pricing which is avoiding many of the contingent facts on the topic which analytically is an error.
My old statistics lecturer used to say ‘comparing apples to oranges is banana’s’ and she was right, to compare two things they need more ‘likeness’ than the fact that both things happen to exist.
Here is a small list of things that occur in other jurisdictions that aren’t being mentioned.
1. Arrangement fees: Many jurisdictions (even around Europe) have arrangement fees factored into the loan, often this is 1% that the borrower pays the financial institution for setting the loan up. This reduces the need to amortize the cost of procurement …
Pat Kenny spoke to Karl Deeter about some of the huge, but unreported issues in the housing market, such as ‘who owns derelict sites and buildings’ and how regulations can sometimes make it difficult to provide quality housing at affordable prices.
This was an extended segment on something of great national importance that generally doesn’t get a lot of airtime so we were very pleased with Newstalk for the opportunity to work through it and to have the time to describe many of the nuances that would otherwise be overlooked.
We were discussing the reasons behind having an allocation in gold or precious metals in a diversified portfolio this week on ‘Talking Money’. Jill Kerby raised interesting points about the benefits while Karl said that it’s a good hedge but also one that has lost a lot of value in recent years.
We’ll be one of the speakers at a property conference being held in UCD tomorrow which is expected to have about 700 attendees.
Our talk is titled ‘Mortgages, Property & why we can’t have nice things’. It’s a look at intertwined aspects of the financial and property markets as well as why some of these issues occur and will continue to occur.
On talking money we looked at mortgage rates, where they are, where they are headed and what the best choice might be for people who are trying to decide what is best for their personal situation.
It’s a tricky question, rates can and do go up and down, but we believe the long term trend is for rates to go lower, in fact, that trend has already been occurring and there isn’t anything that seems in a position to stop it from happening. This is good news for borrowers (not so good for deposit savers!).
Quantitative Easing or ‘QE’ for short, is a process where Central Banks buy assets from commercial banks and it is known to bring down bond yields and drive up other asset values.
This has begun in Europe and on Talking Money we looked at some of the effects it may have and the issues that such a highbrow economic issue raises for regular people.
The idea of ‘financial milestones’ is that at certain times in a persons life they should have achieved certain financial goals. This isn’t materialism, it’s simply a money amount which demonstrates the level of financial sense being instilled in the person, the same as school tests show levels of literacy etc.
Karl Deeter and Jill Kerby went through some that children should have at certain ages and why they are important.
Cars are one of the larger non-housing purchases people make. They are expensive to own and maintain and the shortage of car purchases during the downturn has meant that second hand car prices are quite high now.
This week on talking money we looked at some of the practicalities around buying a car, the price of buying new and some of the things to look out for.