Mortgage approvals up 45% in May

Data released by the Banking and Payments Federation Ireland revealed that mortgage approvals have gone up 35% May of this year in comparison to May of 2016.

 

There were a total of 4,124 mortgages approved in May, with a combined value of €884 million. This represents an increase of 1,078 mortgages and a €275 value compared to May of 2016.

 

This increase in mortgage approvals is likely caused by lower interest rates and by greater general confidence in the economy. It also represents a continuously growing demand in the housing market, and a supply that is slowly but surely catching up.

 

First time buyer mortgage approvals in particular are up 45.8%, the value of such mortgages also saw an even more dramatic increase of 60.7% compared to May of last year. This indicates growing confidence on the part of borrowers. First time buyers are purchasing more expensive housing and are seeing housing prices rise.

 

It is …

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Bank of China opens Dublin branch

On Tuesday, Bank of China opened its first branch in Dublin. The official ceremony was attended by Tian Guoli, Chairman of Bank of China, and by Taoiseach Leo Varadkar, symbolizing the strengthening relationship between China and Ireland, and their many joint trade and financial interests.

Bank of China is China’s most internationally active bank, and has locations in more than 51 countries. Prior to the opening of a branch, it’s presence was already felt in Ireland through BOC Aviation, a separate company that leases aircrafts carriers in Ireland. The Bank is 64% owned by the Chinese government, and  main focus in Ireland will be in corporate lending. It’s major customers will most likely be businesses with interests in China, multinationals, and Chinese firms with operations in Ireland.

Although it’s current interests are narrow, Bank of China hopes to build a diversified platform of services and products in Ireland within the next two years.

The official opening a location not only confirms the Bank’s commercial interests in Ireland, but also signals Irelands growing prominence as a destination for foreign investment.

Martin …

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Is there or is there not another housing bubble?

In reference to No evidence of another Irish housing bubble, IMF says by Peter Hamilton on 26 June 2017 in the Irish Times.

The answer is no but close monitoring is needed. A Washington-based company, the International Monetary Fund (IMF), has confirmed there is no housing bubble in Ireland. Even with the quickly rising prices of property and an increase of mortgage approvals, IMF realizes this is significant but it is not a housing bubble… yet.

There is no statistics to show there is an imbalance of the pricing of houses. However, there is an increase demand for housing that could lead to an imbalance, especially with the Central Bank’s mortgage lender rules and the help-to-buy scheme for first timers. IMF has recommended close monitoring of the market to make sure a bubble is not formed.

The likeliness of this increase of housing demand should …

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Lending is Down in the UK

In reference to Lending levels in UK slow, data from banking industry shows by William Schomberg and Elizabeth Piper on 27 June 2017 in the Irish Examiner.

In the UK, borrowing has been at its slowest growth rate in over a year and a half. Banks have also been offering fewer mortgages which may be a sign of an economic slowdown in Britain.

The numbers are not lying. In one month’s time, consumer lending growth went from 6.4 percent in April to 5.1 percent in May. British Bankers’ Association naming it the weakest increase since October 2015. Mortgages went down from 40,686 to 40,347 in May which has been the smallest amount of mortgages since September.

Could this be a result from Brexit?

Since Brexit started, tension has been rising in Britain. The wage growth has …

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Bank of England limits consumer lending & borrowing

Bank of England has voiced concerns over the increasing level of consumer credit in the UK, and has instituted various restrictions on banks regarding capital buffers, mortgage lending requirements and stress testing.

 

Levels of consumer debt have been rising rapidly, well beyond the rise in income, and bank lending has facilitated it’s growth. Since last April, personal lending has increased by 7% and credit card loans have risen by 9%.

 

The central bank expressed concerns in its most recent financial stability report that lends have grown used to benign economic conditions, and thus have loosened their lending standards. The Bank of England’s Financial Policy Committee warned that though current risks to the financial system remains low, banks should still remain watchful for shocks that could be caused by economic downturns.

 

It has asked banks to increase their capital by £11.4 billion over the next 18 months, thus having a greater buffer if an economic downturn causes a shock to occur, and …

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Central Bank of Ireland: Keeping the countercyclical capital buffer at zero?

In reference to Irish Central Bank maintains countercyclical capital buffer at zero by Peter Hamilton on 27 June 2017 in the Irish Times.

The Central Bank of Ireland decided to keep its countercyclical capital buffer at zero. Only if the current credit conditions remain restrained.

What is a countercyclical capital buffer?

A countercyclical capital buffer (CCyB) is a quarterly decided rate that applies to banks and investment firms. It’s a capital requirement designed to help banks save during the good months to prepare for the bad months. The CCyB will increase if the credit growth is excessive then is released during a period of systematic stress.

Currently, the Central Bank of Ireland said it will remain at zero.

Bank of England, on the other hand, has raised its buffer from zero to 0.5 percent. This leaves bank having to raise an altogether buffer of 11.4 billion euros in 18 months. The Bank of England is also planning on raising the buffer to 1 percent by the end of the year.

The Financial Policy Committee (FPC) of the Bank of England …

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Mortgage market update: lenders have large margins

Dan White authored a piece published in the Irish Independent on June 18 titled: Are greedy mortgage lenders about to see enormous margins squeezed? The article analyses the current mortgage market and concludes that limited competition between lenders is a source of high interest rates in the market and the consequently high margins and profits achieved by lenders. White takes note of current changes in bank’s interest rates and of a paper published by the Competition and Consumer Protection Commission to predict the future of interest rates and margins in the mortgage market.

 

The author cites a paper published by The Competition and Consumer Protection Commission stating that the Irish mortgage market is “characterised by a high concentration of a small number of lenders, limited competition between these lenders and low levels of entry by new players”. This is in part due to the fact that many foreign lenders left the Irish market after the crash. Because of the limited competition, Irish banks had free range to dramatically increase their net …

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Soon to see more regulation among housing

In reference to Greater regulation of our building standards would make it easier to fund social housing by Charles Barry on 26 June 2017 in Independent.

The house building of Ireland is continuing to rise but not without trouble. High demand means there is a chance builders are only looking at their output volume and not the quality. This led to numerous issues that have came up in late 90s and early 2000s – breaking health and safety regulations, pyrite, poor building quality, and contractor bankruptcy.

Regulations have since come up to avoid these issues with Building Control Amendment Regulations and Construction Industry Register Ireland. Even with these regulations in place, it can not completely solve the problem.

There is a similar situation in the UK with about the same building laws. A recent study found that 66 percent of the underlying issues of buildings are caused by poor workmanship.

To help alleviate this issue, the Dáil approved a motion to improve regulation for buildings. It improves the standard and quality as well as support to homeowners …

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The new fast track planning law: will it help boost housing supply?

A new fast-track planning law officially came into effect last Friday. It was passed in December of 2016 as a part of The Planning and Development and Residential Tenancies Act. After months of delays in which officials debated over application fees, the law has now been officially be enacted.

The Planning and Development and Residential Tenancies Act 2016, introduced by former Minister for Housing Simon Coveney, introduced the idea of strategic housing developments. It was intended to provide greater stability for tenants and to help streamline the planning process. An important aspect of the Act is the new fast track planning procedures it introduced. The fast track planning procedure allows developers to bypass their local authority and apply directly to An Bórd Pleanála, an independent authority that previously only made decisions on appeals after plans have been rejected by local authorities. The Board was established by the Local Government Act of 1976, and now its responsibilities will expand to include taking and reviewing applications submitted through the …

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Another bank bailout in the European Union

With reference to E.U. Commission Approves Billions in Aid for 2 Italian Banks by Jack Ewing on 25 June 2017 in the New York Times.

On Sunday, the European Commission took quick action when two small Italian banks, Banca Popolare di Vicenze and Veneto Banca, were heading towards bankruptcy. To avoid Italian residents losing confidence in the banking system the E.U. allowed the Italian government to bailout the two banks for billions.

The plan is 4.8 billion euros in cash and 12 billion in guarantees of depositors. The two banks only account for 2 percent of Italian deposits.

The reason to go this route is because the majority of the Italian banks are consisted of problem loans and very little capital. Fear if these two banks fail it will cause a panic. Italians might lose faith in the banking system and could cause people to withdraw their money and banks will shut down.

The investors of this bank in senior bonds will keep their investment, however, junior bond investors will lose theirs as well as shareholders.

Despite this large …

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