Irish Mortgage Brokers Blog

We have made a few more bold predictions in our ‘Mortgage Market Trend Outlook 2012′ and reviewed how wrong many of our 2011 forecasts were as well.

Some of the main points thus far are:

1. That mortgage lending bottomed out in 2011.
2. That IBRC may take on some tracker loan portfolios to de-risk state owned banks (as the state already owns these loans entirely anyway).
3. That rates for existing AIB borrowers will have to go up but that for new borrowers rates may come down with changes to how prices are charged depending on risk of the proposed loan.
4. That deposit rates will start to drop.
5. That up to 25,000 mortgages will be deemed ‘unsustainable’ and that the ‘won’t pay’ contingent of arrears cases may be as high as 1 in 5.

We hope you enjoy this report, we in turn hope that we get some of the calls right!

Many thanks,

Irish Mortgage Brokers

RTE interviewed Karl Deeter in this clip about the recent CSO report, it was on the 20th of December 2011.

This piece by Claire Brock of TV3 was about Mario Draghi’s unexpected rate cut of 0.25% last Thursday.

The debate about whether or not it will be passed on still rages. We spoke about that particular issue the following day on both LMFM and Newstalk.

I hope you enjoyed the first round of economic history from 2008 to 2011, I think it is time for round 2.

Alan Greenspan was on CNBC last week and his interview is a very interesting take on Europe - which happens to be the first thing he looks at every day (European Bond Markets). Meanwhile Lloyds are reporting that the risk of a 2nd recession in the UK are higher at c. 25-30%.

Greece is the crisis that just keeps giving, The Telegraph has the usual Eurosceptic line but it isn’t about being smug any more. The Greek referendum call of recent days came out of left field and while it may never actually occur the political optics show that the Aegean issues are far from solved, along with the replacement of military officials (the interpretation being the fear of a coup).

And German joblessness is higher for the first time in 2 years, standing now at 7%. The rate of inflation in Germany is currently 2.6% (HICP at 2.86%), having remained over 2% since January 2011. The issue with that (and unemployment that wasn’t growing) is that it lead to a ‘Goldilocks delusion’ where not cutting rates and fiscally conservative policy was considered best. It seems now that Germany has not decoupled from the rest of Europe.

Growing resentment about profligate EU members along with some fear inducing inflation as well as rising unemployment make for a very grumpy Germany, it does not bide well for negotiations. Perhaps hindsight will equally not bide well for the Germany that handled the Great Recession so well (from an employment perspective) either?

Of course at home here in Ireland we are about to pay €700,000,000.00 to speculative/junk rated bond holders who in any normal circumstances would be jumping for joy at a 50% haircut. Politicians are walking out of the Dail due to the lack of discussion, and bingo halls being raided by cops [irrelevant but a sign of the times!].

The Central Bank of Italy (Banca d’Italia) €-Coin ‘one figure for all European GDP’ statistic is also showing a sharp down-trend at present, negative for the first time since September 2009. Italy, with the worlds 3rd largest debtor at €1.9 trillion Euro, and winner of ’scary chart of the day’ almost every day regarding their bond spreads v.s Germany.

I don’t know of any model that can capture and create metrics out of the information flying around at present. There are interesting twitter based investment tools that use crowd sourced information to imply the trajectory of the markets, but I’m not privy to being under the hood on those.

What I am trying to say is that all of this news doesn’t paint a pretty vista, and in this analysts opinion the October/November 2011 period will be another big turning point or cusp. I last made a call like this in January of 2008 (and while it seemed grim at the time it was understated in retrospect), and during that time I went entirely to cash and advised all of our private clients to do the same until late 08′ early 09′.

Today I am repeating that call - to stay out of the markets for a while and see what comes of this all. You might miss out on the Spring 09′ moment, but you won’t face the burn on the road that gets you there. The news flow is simply too negative at present for confidence to go any other way than down, capital preservation remains key.

Until Central Banks step up to the plate (and it our long held belief that they must and will -they are already our lifeline) with the multi-trillion multi-lateral approach there is no reason to do anything other than earn interest.

It seems that dithering is not the answer.

This is based on research from the Broker/Life Assurance industry, so put on your filters, but nonetheless it is interesting.

1 in every 2 adults (1.6 million people) have NO Life cover or protection of any kind, but 9 out of 10 people admit to needing it.

1 in 5 people (360,000 families) are considering taking out life cover in the next 12 months, but most think it is dearer than it is.

Engagement is the big issue – almost 60% of people say they are simply not being asked.
On the last point, it seems we have some more phone calls to make!

Don’t watch this if you want to sleep well tonight.

The Banker has an excellent article on this in their Bank Trends section. A picture speaks a thousand words!

There were some excellent presentations at the EHES this year, where some of the worlds leading historians, economists and economic historians gathered to share their thoughts.

The first video is excellent, Bob Allen of Oxford talks about why the Industrial Revolution was (in his opinion) a result of high wages and lower energy costs - which lead to a preference for technical innovation. Deirdre McCloskey of Chicago University offers excellent criticism in the questions at the end. Apologies for the sound quality, Bob had a tendency to move away from the mic and I wasn’t using a remote one.

In the next video Branko Milanovic talks about income distributions in the Mediterranean countries 2,000 years ago, and using very sparse data creates a compelling view of income from that time, what I took from this one was that income inequality has always been alive and well, a Roman Senator made about 500 times the wages of a regular worker (watch the video!).

Then there is a Roundtable discussion featuring the ‘who’s who’ of economic history

Fascinating video (that takes some time but is well worth it). This video looks at the various issues surrounding growth.