Irish Mortgage Brokers Blog

If you go into arrears on your mortgage or you talk to your lender because you believe you are a ‘pre-arrears’ candidate then you will be asked to fill in a ‘Standard Financial Statement‘ or SFS which is part of the Mortgage Arrears Resolution Process (MARP) which started last year.

Engaging with the lender is a key tenet of this and filling in the SFS and liaising with the lender on aspects of it. The information in this is what will be used to negotiate the repayment that you will pay in cases where lifestyle adjustment does not allow you to make the full payment.

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

This is the usual update of rates available at the moment. As you’ll notice, AIB is the leader in almost every section. However, they are not necessarily lending to every client hoping to obtain finance with them - to know if they’ll be the lender of choice you need to construct the application in a manner that will ensure it shows the best aspects of the case to them.

There are lots of other lenders out there too (we deal with the pillar banks and many others as well), so looking at ‘best rate’ is perhaps different than ‘best attainable rate’.

Anyway, here is the list, if you ever want mortgage advice give us a call! 016790990

Best variable rate mortgage: AIB 3.24% (with one for 2.84% < 50% LTV)

Best 1yr fixed rate mortgage: AIB 4.15%

Best 2yr fixed rate mortgage: PTsb 3.1% < 50% LTV, otherwise AIB 4.65%

Best 3yr fixed rate mortgage: AIB 4.88%

Best 5yr fixed rate mortgage: PTsb 3.7% < 50% LTV, otherwise its AIB 5.35%

Best 10yr fixed rate mortgage: n/A 12/2011

Oh, one final thing, AIB called everybody into a meeting at their head office about two weeks ago, the resounding message was that they are going to be lending more in 2012 but prudence will remain and prices will change (upwards to more comparable market rates).

Yesterday the Examiner broke a story about tracker mortgage holders potentially missing out because they are not reading their terms and conditions. This is an issue we have seen first hand in our company, but it wasn’t due to not reading the terms and conditions, it was down to a bank error.

Recently Bank of Ireland had to put 2,000 accounts back on trackers after they mistakenly took them off and onto variable rates. AIB made the same mistake 214 times and PTsb did it 53 times.

In our own brokerages case we saw something similar recently with PTsb, they insisted to a client that no tracker was available. Then, only after the client remortgaged did they admit their error and offer it back. We represented the client in this case and insisted that all costs were also covered in reinstating the mortgage. This means paying solicitor fees, losses on clawbacks, breakage fees for the fixed rate undertaken etc.

Where this happens has tended to be where people come off of fixed rates and in their ‘rate choice letter’ (a letter you get c. 60-90 days before fixed rate expiration) the tracker is not mentioned. Several banks have made this error and thankfully it is becoming more rare as internal audits have identified and remedied the problem in many cases.

Our advice is (as per interview with Newstalk today) to write a short letter if you are coming off a fixed rate to your lender and ask ‘is a tracker available, if not then please point out the clause that indicates this and why’. This should at least ensure that your loan gets a diligent ‘once over’ by the lender who should be able to tell without doubt what the situation is once they go through your paperwork.

John Finnerty interviewed us about the PTsb story that was in the Sunday Business Post.

Here is the letter that you can expect to get from PTsb about making a lump sum payment on your mortgage, in return you get an additional 10% of the capital knocked off the amount owed.

We were really pleased to feature on TV3’s ‘Morning Show’ with Sybil and Martin (Brian was standing in for Martin) in a conversation about property prices and whether or not we have hit the bottom. Aoife Walsh from the Respond! Housing Agency was also there giving some great information and advice for borrowers in trouble.

I was interested in the front page of today’s Independent in which Charlie Weston broke a really big story about Irish banks being in advanced stages of designing ‘Negative Equity Mortgages’ (this is vastly different than the Negative Equity Loan/Short Sale Loan we have discussed previously). Essentially the bank will allow an individual to carry negative equity out of one property and move that onto another one within certain parameters.

This practice has already existed in the UK and is offered by Nationwide, Coventry and RBS, the schemes have not proved to be very popular, in part because of the stringent underwriting required. It is one thing for a client to fall into negative equity but another to actually facilitate them in compounding that fact and taking a further bet on their ability to repay. What do I mean by that?

First Loan: €200,000
Value: €150,000
Neg/Eq: €50,000

Then the €50,000 shortfall is passed into a second loan of (for example) €200,000 (which by nature will essentially be a 100% mortgage) and now they owe €250,000 with €50,000 negative equity in place the day they close.

In this case the borrower now owes more but they have a different property which they are more happy with and underwriting will ensure that they can still service the loan, but how many people will be willing to take up such a product? And who will the bank be willing to lend to on this basis? Credit is already tight, to trust a person with yet more money and negative equity in advance is a gamble, this beast is the evil love child of 100% mortgages - the very brand of lending that was a factor in the property bubble.

The sole saving grace is that people won’t opt for it, in the UK the uptake has been incredibly low, it is a niche product with little in the way of demand, it will help the people who are happy to use it and will be of little use to the average borrower, having said that, the Regulator recently said that banks have failed to learn their lessons from the crisis and that they don’t lend enough to business and rely to heavily on property, if this is the latest in financial innovation can we truly say they are learning anything at all?

In the first quarter of 2010 there were c. 62 business days, and from this time frame we have gotten the most recent lending figures from the Irish Bankers Federation on mortgages in Ireland. Those figures stated that there were 6,954 mortgages drawn down in the first quarter of 2010 equating to €1.22bn in lending.

Those are the hard facts.

Then come the contradictions. AIB claim to have about 40% of the mortgage market - that headline is from last November but we can assume it should still remain at above 30%, an institutional contraction of 25% would be known because it would definitely make headlines (the 40% of the market AIB has is 100% to them so if it fell to 30% that would be a 25% reduction on their single institution figures). Back on topic - if we accept that AIB is holding at least 30% of the market then that means they were responsible for 2,086 mortgages.

EBS are saying they have about 28% of the market, up from 21% last year. The bit I like best is where they say that one in two people who go direct to a bank for a mortgage went to EBS. Sadly, this doesn’t factor in the reality on the ground - every broker in town has a back door with the EBS via one of their agent branches and clients are regularly sent to them for loans when their more conservative broker wing won’t do the mortgage [EBS are loose on policy when you go direct].  A 28% market share would mean EBS were responsible for 1,947 mortgages.

We didn’t find statements of market share from the other banks, but I think it would be fair to say that between PTsb, Ulsterbank, NIB, INBS and KBC that they were jointly responsible for perhaps 15% of the market? (1,043 mortgages).

So we are now looking at a picture like this: AIB 2086 mortgages + EBS 1947 mortgages + everybody except BOI 1,043 mortgages = 5,076 mortgages

Nothing spectacular there until you get back to the fact that we had about 62 banking days in the first quarter of 2010, because during that time Bank of Ireland were claiming they were doing 100 mortgages a day. That would equate to 6,200 mortgages.

BOI figures 6,200 + everybody else’s figures of 5,076 = 11,276 mortgages

Reality = 6,954 mortgages.

Difference between the two? About 4,322 mortgages or in the region of €870,000,000 in lending.

In a nutshell, somebody somewhere is telling porkies. Who even cares any more.

PTsb have been fairly honest in the way they have handled their loan book over the last two years, unpopular too, however it is important to look at what they are doing, why they did it and what they will do next.

Their first mortgage rate increase came in July 2009 and it was an additional 0.5% on top of the existing variable rate mortgage. The second PTsb rate hike came at the end of January 2010 and was effective from the 1st of February 2010.

PTsb are not part of NAMA, they are benefiting by the guarantee (as are the likes of Postbank) but they are paying for that guarantee - and the only way they can continue operations without requiring an outright bailout is to increase rates, shrink their loan book and reduce costs. In that respect they are to be admired, they are doing what is necessary to remain a going concern.

The trend to watch for however, is that they will continue to increase rates, and their fixed rate offering will remain high, their ideal situation is to ramp up assets and because of that you’ll probably see the conservative rate suite (5 & 10yr fixed rates) on very low LTV’s (<50%) coming in at market leading rates, that is part of the game plan, you can shrink your loan book (ratio’s not absolute terms) by attracting low LTV biz and this is precisely what PTsb plan to do.