Chris Donoghue interviewed Karl Deeter of Irish Mortgage Brokers regarding the rule changes that were brought in by the Central Bank and both how and who they would affect.
Anton had Karl Deeter on to discuss the proposed mortgage loan caps that were being discussed by the Central Bank. Our view is that something more nuanced was needed, thankfully, at the time of posting this we now know the details and they did opt for a more carefully balanced solution.
We were asked to comment on the Central Bank mortgage loan proposals, we believe they are as blunt an instrument as you could use and that a more nuanced solution would be not only easier to implement but more effective. Equally, we don’t expect any such approach to be undertaken as too much of the regulators reputation has been staked on this policy.
Just when we thought we heard it all in terms of the strange scenarios you encounter in credit, up pop’s something new, the problem of ‘over-saving’. For most of us the problem is ‘saving anything at all’, but in some cases the potential borrower goes far beyond what is good for them.
Here is how it manifests.
So far we have seen this mainly in people who are at average wage and below, and how it occurs is that in an effort to save as much as possible that they then make their bank statements look bad.
I got a call from one of our brokers to look at a case they had, the bank statements didn’t look good, they had referral fee’s and were in overdraft.
A referral fee is where you might have no overdraft and you go overdrawn, you might have €10 left and go to withdraw €200. In this case you’ll be minus €190 and see a thing called a ‘referral fee’ which is typically €4.44 it means that you broke the terms of the account …
This is a copy of a good debate that took place on the Sean O’Rourke show today on RTE Radio. It was a good example of how two contrary points can both have supporting arguments which seek different ends but where both sides have validity. We think that a return to bubble credit would be a disaster, but equally hold dear the idea that it isn’t up to Central Banks to orchestrate the winners and losers in society.
This was our first time to do ‘Talking Money’ on RTE’s Drivetime Show, we looked at financial resolutions, how to make them simple, and most importantly, how to set them up so you actually implement them, the key is to take small steps and form habits rather than trying to do it all at once. Listen in to the clip to find out more!
We have commented several times since last year that the trend for mortgage rates in 2015 will be to see them drop. With spreads of c. 300bp’s on lending it makes it one of the reliably profitable sectors of banking given the stringent underwriting being applied.
With the Central Bank looking to curtail first time buyers but doing nothing about incumbent borrowers getting restricted it means that they have directed the market towards refinancing.
This is because one of the niches left on the table is that of existing variable rate holders, which banks will now try to tempt away from one another in an effort to grow market share.
There are many who cannot take part and below is a list of the mortgage holders who won’t benefit.Those in negative equity, they are going to be stuck when it comes to refinance, they can trade up with a negative equity mortgage but they won’t be able to ‘switch’. Those on fixed rates which accounts for in the region of 50,000 mortgage accounts, they face break penalties, and only …
Last year marked our 10th anniversary and also the 10th year for which we had no customer complaint which required any adjudication by the Financial Services Ombudsman (or any other office prior to their existence).
This makes us very happy, and is a sign of our continued commitment to our clients who are the people who keep us in business.
It doesn’t mean people never get upset, mortgages and in particular the closing part of the process can be plagued with difficulties but we do our best to manage this process and help our customers avoid the brunt of it.
And we also do get ‘complaints’ as any firm does, but none have ever gone to the FSO and required their adjudication which means we either put things right on our own or the complaint was invalid/frivolous.
We think 2015 will mark our 11th year of being complaint free (not an invitation to the trolls to mess up our record!), and look forward to another year of being open for business and both ready and willing to help.
You’ll have to forgive the meme reference of ‘Rule 34′, because ‘Rule 72′ is a financial mathematics tool that helps you decide how long it will take for a sum to double at a certain rate of return.
How does it work? Easy, you just take the number 72 and divide it by the interest rate, so if you had a sum of €10,000 and were getting a 4% return, how long would it take for you to double your money?
Workings: 72/4 = 18 so it should take 18 years to turn €10,000 into €20,000. We can test this using financial maths by inserting €10,000 into the formula of 10,000*(1+r)^x which will take our principal and gross it up by the compounded series at 4%.
€10,000 x (1+0.04)^18 = 10,000 x 2.02581 = €20,258
So while it isn’t as precise as the known formula calculation, it’s very close given that we are discussing a term of 18 years. You can use the rule of 72 for any interest rate and it will get you a fairly close answer, although …
We were asked by Morning Ireland to discuss homelessness and to iterate our view that the removal of bedsits which were a source of housing for people with low to no incomes was a mistake. Focus Ireland shared the view and made important points about their work being more than just putting roofs over peoples heads.