12 people become property millionaires each week

On average, a dozen people each week becomes property millionaires in Ireland. There are currently around 4,000 homeowners with property worth more than €1 million, and the rates at which new million euro homes are listed and sold are increasing rapidly.

 

Across the country, house prices have increased by 9.4% in the past year, and 40% in the past five years, turning many homeowners into property millionaires. While the average property value is currently around €230,000 and the average value in Dublin is around €350,000, many districts and counties have average values of 700,000 or more.

 

Sandycove in Dublin has an average property value of close to €800,000. An even more expensive street is Herbert Park in Dublin, where five homes have sold for more than €3 million in the past 2 years. A quick search on myhome.ie will reveal that around Dublin’s Ranelgh area, a couple houses are listed at more than €5 million. Other areas with the most expensive home prices include Foxrock and …

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An opportunity for home owners amidst rising house prices

The average house price in Ireland has risen 11.2% over the past year, and prices in at least 8 counties are currently rising faster than that immediately preceding the market crash. Rapidly rising prices, low interest rates, and insufficient supply are together representative of the current situation in Ireland’s property market. Although this situation has many market watchers worried about possible inflation, and is definitely a hindrance to buyers still seeking for a home at an affordable price, there is a perk that could result for homeowners with an existing mortgage.

 

This blog post will illustrate this hidden opportunity and give homeowners the necessary knowledge if they intend to pursue it.

 

For homeowners with a high standard variable or fixed rate mortgage, your interest rate is most often based directly on your Loan-to-Value  ratio (LTV). The loan to value ratio is ratio of your loan to the value of your property. Each lending institution may have a different way of calculating and determining your interest rate but in general, the higher your LTV, the higher your interest rate. …

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Cash back deals: are banks manipulating borrowers?

The Competition and Consumer Protection Commission (CCPC) warned lenders last month about their use of cashback deals and loyalty discounts. The commission believes that such incentives may be detrimental to consumers and may reflect unhealthy competition in the mortgage market.

 

Cash back deals have become more and more common in the market in recent years. These deals work by giving borrowers a certain percentage of their total mortgage amount back at the start of their loan, and they mostly target first time buyers who may need the extra money on hand to furnish their homes or to tide them through a tough transitional time in life.

 

A quick look around the market reveals that major lenders, such as AIB, Ulster Bank, Bank of Ireland, EBS and KBC, all have similar cash back deals, mostly ranging from 2-3% or €1500-€2000. The catch on these loans however, is that interest rates on them are often higher than the average on traditional loans. This means that over the term of the loan, extra interest paid  may turn out to be much …

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PRA warns against 35 year mortgages in England

Traditionally, banks have offered mortgage terms of 25 years to buyers, a long enough time so that buyers can have both low monthly payments and a moderate level of total interest paid. In recent years however, there has been a trend towards mortgage loans of even longer terms, those 35 years or longer in the UK mortgage market. By extending the duration of loans, banks have reduced the amount borrowers pay as monthly instalments, thus making housing appear more affordable in the short run. Despite its apparent benefits however, the Prudential Regulation Authority (PRA) of the Bank of England has issued warnings about these loans and their risks and consequences.

 

Earlier this week, in a speech intended to be delivered in May but pushed back due to the election, head of the PRA, Sam Woods warned lenders about offering long term mortgages. With mortgages of over 35 years, there is an increase likelihood that the later instalments would have to be paid with post retirement income. Woods and the agency believes that this dramatically increases the risk of these …

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Shadow mortgage lending in Hong Kong

Property prices have been booming in Hong Kong over the past couple of years, and have yet to reflect any slowdown. While various governmental regulations have attempted to curb growth, a closer look at Hong Kong’s mortgage market reveals that shadow lenders are rapidly gaining ground. These mortgage lenders operate outside of financial regulations and have become the option of many buyers as more limits are placed by the Central Bank on traditional forms of financing.

 

Shadow lending describes private lending performed by institutions that are not tradition banks. These institutions can be financial intermediaries or other lenders and provide similar services as banks. These institutions do not necessarily create instability in the financial system, and can be greatly beneficial by offering financing to buyers in a time where restrictions on tradition banks are tight. However, these institutions lie outside the control of official regulatory institutions, thus their lending practices may be at greater risk if a financial downturn were to happen.

 

In most countries, the major of home loans are still made out by traditional banks, and …

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Mortgage lending gets tougher in Canada

The Canadian housing market has been growing rapidly in the past few years. Currently, many experts fear that home in cities like Toronto and Montreal are greatly overvalued, a reflection on the general instability in the Canadian economy. While Bank of Canada has yet to announce its well anticipated interest rate hike that will curb the rapidly rising house prices, lenders have already begun tightening lending rules and raising mortgage rates.

 

Early this month, major lenders Bank of Montreal, CIBC and Royal Bank of Canada have all raised rates on various types of fixed rate mortgages. Both Bank of Montreal and Royal Bank of Canada raised mortgage rates by 0.2% and rates at CIBC raised by 0.05%. The higher rates of lending is thought to precede Bank of Canada’s anticipated rate hike, which may come as soon as tomorrow.

 

Accompanying the higher mortgage rates is a series of other lending restrictions put in place by Canada’s banking regulator, The Office of the Superintendent of Financial Institutions …

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Bank of England raises counter-cyclical capital buffer to 0.5%

Bank of England announced to lenders that it is raising the country’s counter-cyclical capital buffer from 0 to 0.5% to mitigate pressures from increasing consumer credit. The counter-cyclical capital buffer is a requirement on all banks, lenders and investment firms to keep a certain level of capital when credit growth is excessive. To a certain extent, this buffer is able to insulate banks from the cyclical growth and downturns of the economy. Bank of England’s decision reflects its interests in slowing down credit and lending in the British economy.

 

By raising the counter-cyclical capital buffer to 0.5%, British banks must increase their held capital by over £11.4 billion over the next 18 months. The Bank of England also has the intentions of further increasing the buffer by 0.5% to 1% by the end of 2017 to combat increases in consumer credit and lending. The counter-cyclical buffer has only been used once in the UK, but was quickly revoked due to stagnate economy conditions during the immediate aftermath of Brexit.

 

Bank of England’s Financial Policy Committee warned that there …

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Housing Prices push up living wage

The Living Wage Technical Group, an organization that annually calculates the wage required to support an acceptable standard of living in Ireland, recently published it’s 2017 report, listing the living wage as €11.70 an hour. This new rate is €0.20 higher than the previous rate and €2.45 higher than the actual minimum wage in Ireland.

 

The Living Wage Group defines the living wage as a rate that “provides employees with sufficient income to achieve an agreed acceptable minimum standard of living”. It is calculated to account for the price of various necessities such as clothing, food, housing, healthcare, and education. Out of these factors, many experts have attributed rising housing prices as the main reasons behind the need for higher wages.

 

In its 2017 report, the Living Wage Group supported this reasoning and published that “the current housing crisis, and associated increases in rent levels, has been the main driver of the increased wage rate”. The average house price in Ireland has risen 11.2% over the past year, with areas such as Dublin seeing even greater increases in …

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Unemployment rate falls towards 6%

New figures released by the Central Statistics Office show that the current rate of unemployment is 6.3%, the lowest it has ever been since the market crash. This rate is 2% lower than that recorded in June of 2016 and the exact number of workers who are listed as unemployed fell by 42,100 during this time.

 

The current rate of unemployment in Ireland is 3% lower than the EU average, reflecting this country’s incredible economic progress in the past few years. Although the unemployment rate is still higher than that in countries like Germany and the Netherlands, experts predict that the steady downward trend will continue.

 

Furthermore, Ireland has an unique advantage in its ability to better integrate immigrants into the work force. The unemployment rate for foreign nationals in Ireland stood at just 7.7% last month, when they are much higher across the rest of Europe.

 

Economist Mariano Mamertino believes that “Ireland remains on a clear trajectory for unemployment to …

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Proportion of buyers with mortgages surpass those who buy in cash in first time since market crash

Recent data reveals that the percentage of home buyers with mortgages have surpassed that of those who buy in cash. This is the first time this has happened since the property bubble and subsequent crash. On July 26th 2016, an Irish Independent/Real Estate Alliance survey reported that 60% of houses are bought with cash, now, roughly a year later, the same survey concluded that less than 30% of homes are purchased by cash buyers.

 

During the years after the housing crash, the high percentages of cash buyers was caused by higher interest rates, stricter restrictions on lending, higher rates of unemployment, and the large amount of speculators purchasing properties as assets after the original home owners have defaulted on their loans. This indicated a general distrust in the market and the squeezing out of mortgage buyers who have defaulted on their homes.

 

Central Bank economist Dermot Coates predicted in 2016 that the proportion of cash buyers was “neither sustainable nor likely to continue into the future”. …

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