We took part in a conversation with Matt Cooper on The Last Word about bank taxation with Joan Burton from the Labour Party. We tried to make the point that short term thinking about bank taxation is a mistake, that we are better off getting the maximum amount of money back to the state rather than losing bank value in order to score a short term political win.
We were happy to take part with Maria on WLR FM about the loans that were being sold by Ulsterbank. We wanted to make the point that restructured loans that were making their payments were not going to be transferred and that many of these loans were many years in arrears (on the residential loans it is often 7 years behind). This indicates the loans are not sustainable, and that concluding the loans is probably a better outcome for all parties than the continued situation where the banks and borrowers are both in total denial. After a decade of this crisis it has come to the point where people have to accept that some homes will be lost but that sometimes those homes are empty, other times the person will get debt writedowns and that’s a good outcome too.
Why have recent reports been showing an increase in the number of mortgages being in arrears? More specifically the interest-only mortgages? And furthermore specifically, those on buy-to-let homes?
Interest only mortgages are typically mortgages that are seen to be taken by investors searching for a more affordable option to the standard mortgage scheme.
So, why has it been found that those who hold interest-only mortgages are more likely to be in arrears today?
In a recent study by the Central Bank, it was found that this is the case for investors on an interest-only mortgage deal for buy-to-let homes.
The surplus in interest-only mortgages that we are seeing today was initiated by buyers of high end and expensive properties during the last housing boom.
It is predicted now, that we will see a strong increase in the amount of homeowner to go into arrears as nearly a third of the interest-only mortgages have plans to make the switch to paying a traditional capital and interest mortgage from present 2018 to 2022.
It is not of a …
Last week the Institute of Banking held a forum on behalf of the Irish Mortgage market in which Deputy Governor Ed Sibley delivered a speech addressing much of what is prevalent in the country today.
It began by briefing the current housing situation in Ireland. Simply put, it’s dreadful. As many are on the pursuit of suitable housing the “toxic legacies of the financial crisis” are proceeding to cause mayhem throughout the nation.
The forum started by discussing the role of the central bank. The central bank plays a much greater part in the overall mortgage market than one may think.
It is up to the central bank to ensure that “the economic and social good of mortgage provision is prudent, sustainable, and that the best interests of consumers are protected. “
The central bank has had to take extensive interventionist movements in the Irish mortgage market since the financial crisis as Ireland typically experiences extreme economic and human hardships when these certain risks arise.
In order for the mortgage market to function properly, consumers …
There has been an ongoing narrative that the last housing boom (and many others) was only possible due to excessive credit. We have argued for a long time that this is a mistaken interpretation. While credit can make a bad situation worse, just like adding fuel to a flame, it is not the genesis of the problem.
We were pleased to see this view articulated by the Central Bank Governor Philip Lane recently. He stated that “cash buyers of property are limiting the ability of the Central Bank to control house prices through mortgage lending rules” he “singled out cash buyers as one of the key drivers of inflation in the Irish property market. Cash buyers used to account for about 25 per cent of house purchases in Ireland, but since the crash and ensuing credit crunch this figure has risen to 60 per cent“.
This is a point we have been making for years, firstly was that first time buyers are not, and have not been the problem. That was part of why we were specifically …
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 …
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 …
This past Sunday, current Housing Minister Eoghan Murphy said on RTE’s The Week in Politics that the Help-to-Buy initiative introduced by his predecessor is currently under review. Since its introduction in January under former Finance Minister Michael Noonan and former Housing Minister Simon Coveney, the Help-to-Buy initiative has already received nearly 7,000 applicants and has successfully helped a great percentage of them with the purchase or building of their first home. However, the initiative has recently come under fire for exacerbating the problems it intended to solve, and there is speculation that it may be dissolved.
The purpose of the Help-to-Buy incentive was to encourage first buyers to enter the market by helping applicants with their deposit through the refund of applicants’ income tax and DIRT other the past 4 years. It applies to first time buyers who either purchase or build new residential properties, and allows them to receive 5% of the purchase price of their new home, with an upward limit of €20,000. It is hoped that the incentive would help more people climb the property ladder, …
This post is in reference to It’s time to shout ‘stop’ on excessive charges by Brendan Burgess and Banks warned over cashback mortgage deals by Donal O’Donovan. Both published on June 16 2017 in the Independent.
Interest rates are high for non-tracker mortgages and banks are offering cashback deals to manipulate customers.
Everyone is accusing everyone today in the mortgage market in Ireland with interest rates the highest in the European Union. The Competition and Consumer Protections Commission (CCPC) have sat idly by for the past years as the interest rates are rising when the CCPC is designed and paid by the taxpayer to protect the consumers. CCPC came out with a report yesterday stating Ireland needs more competition, long-term strategy, vision and more committees. No suggestions in the report have a solution for the short-term.
The Government, Central Bank, and the CCPC wants everyone to be patient and the competition with drive down mortgage rate… but how long from now? Government and the Central Bank have been saying this for the past three years and nothing has changed.
Now …
You can find an article at this link which mentions Karl Deeter, apart of Irish Mortgage Brokers – Bank accused of ‘gouging’ loyal customers cuts its fixed rates on June 15 2017. Article by Charlie Weston in the Independent.
Permanent TSB, a state-rescued bank, has been increasingly cutting fixed rates in response to being accused of manipulating their clients. The bank has lowered it’s two-year fixed mortgages from 7.25% to 4.20% and three-year fixed mortgages from 8.75% to 4.20%. They have almost halved both of their fixed rate mortgages but the variable rate at the bank has remained the same.
The Central Bank has noticed an increase of fixed variable rates compared to variable for both new borrowers and existing ones. Therefore, banks have been reducing fixed rates to increase competition amongst other banks. This will prevent clients to switching to other banks for better deals.
The bank also extended a 2% cashback on all new mortgage drawdowns, supposed to end this month but got extended to the end of the year.
Karl Deeter was mentioned accusing the bank …