Mortgage Market Update

The Financial Broker gives readers an overview on currently property prices and mortgage market conditions.

The Central Statistics Office published a report showing price inflation on property had increased 10.7% in the past year up to February. A similar report reveal how the number of newly build housing last year was 14,932 units when estimates denote a demand of up to 50,000 units. These numbers illustrate a problem in the current mortgage market, which this article pinpoints the causes of. The author laments about rising property prices, arguing that many potential home buyers have missed out on the prime time to purchase property, and are currently no long capable of affording the housing of their choice at an acceptable price.

The author attributes the current housing price and rent inflation in Ireland as consequences of a lack of supply in urban areas instead of lax macro-prudential regulations. In fact, she argues that current Central Bank regulations are too restrictive, and thus have prevented demanders from being able to locate and buy affordable housing. While the prudential regulations have lowered the …

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Highlights from the 2017 Macro-Financial Review

The Central Bank of Ireland published today it’s 2017 Macro-Financial Review. The report gives an overview of the Irish economy and the state of its financial environment. The aim of the report is to help protect the interests of the Bank’s stakeholders, these include: the Irish people, national and international authorities, and other participants in the financial market.

Sharon Donnery, the Central Bank’s deputy governor, introduced the report in a speech this morning. She states that the state of the general economy is improving, but also mentions a few outstanding issues that have the potential to negatively impact the economy’s improvement.

The report notes that much of the uncertainty in the Irish economy is a consequence of Brexit. The depreciation of the sterling against the euro and decreasing consumer spending in the UK has already put a burden on export industries. Uncertainties relating to Brexit may also arise from new trade barriers, trade policies and changes in international taxation.

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ECB Putting Pressure on Irish Banks?

European Central Bank is putting pressure on Ireland’s main banks to deal with the non-performing mortgages on their books. The banks are coming up with ways to remove these non-performing loans off their balance sheets. Considering the possibility of special purpose vehicles (SPV) that package all of the non-performing loans. They will need to sell the majority of the stake of the SPV to investors for them to remove it from their books. By creating SPVs, banks will still be able to service and have a stake in the mortgages. They are starting to create leads on investors currently.

With the ECB already overseeing a lot of the main banks in Ireland in the end of 2014, they have cut their average of 27% of non-performing loans off their balance sheet in 2013 to 14% at the end of 2016.

In the recent years, US private equity firms have refinanced millions of non-performing loans from Irish lenders. Showing a demand for such bonds because of the great success of residential mortgage backed securitisation. The banks will need to structure any …

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How Do American Mortgages Work? Part 10: How does Western European Mortgages Compare

Relating this series to the Western European mortgage market, as fixed-rate mortgages are most common among America while variable-rate mortgages are the most common in Western Europe. This is because Fannie Mae and Freddie Mac insure their mortgages. This means it does not affect the lenders if the interest rate rises on a fixed-rate mortgage. It is so, because the mortgage market in the United States relies more on the secondary mortgage market than on formal government guarantees. Comparing home ownership rates between the United States and Western Europe, they are fairly similar but higher default rate in the United States. Mortgage loans are mostly non-recourse debt where the borrower is not personally liable in the United States.

With Ireland’s typical interest rate being higher compared to other Western European countries, theorist claim it was from the popularity of Tracker mortgages. Tracker mortgages being locked in at 1% higher than the European Central Bank (ECB) Rate, when the ECB rate hit 0% lenders were contractually obligated to have the borrowers’ interest rate at 1%. Since the lenders need to make …

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Could Monetary Policy be affecting the Mortgage Default Rate?

With reference to How does monetary policy pass-through affect mortgage default? Evidence from the Irish mortgage market by David Byrne, Robert Kelly, and Conor O’Toole. 04/RT/2017

With the loosening structure of the monetary policy by central banks after the global financial crisis, which allowed the mortgage interest rates to be lower which could have led to a lower default rate on mortgages. This post will focus on two different types of mortgages the Standard Variable Rate mortgage (most commonly known as SVR) and the Tracker mortgage.

A SVR is a mortgage where the lender has the ability to decide when and if the interest rate on the loan will change while a Tracker mortgage is where the interest rate is set to a certain percentage above the European Central Bank interest rate. As the number of Tracker mortgages were increasing while the European Central Bank interest rate was decreasing, the banks started to lose money on them as the interest rate on the mortgage payments were not high enough to cover the cost of the loan. …

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Independent.ie mention Irish Mortgage Brokers

We were mentioned in the Independent today in a story relating to the Central Bank, it hinged upon the fact that they had a ‘whistleblower’ line for people wanting to report financial wrongdoing and it wasn’t operating correctly which means they couldn’t take a call.

The story quoted us as follows: Compliance officer with Irish Mortgage Brokers Karl Deeter said it was not good enough that the whistleblower phone line was not being answered and emails not getting a response.

“Imagine if you called 999 to report a crime and no one answered. What would you think of our police service?” he said. A Central Bank spokesman claimed the problem had been rectified after the situation was raised with it by the Irish Independent.

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Newstalk: Karl Deeter on the Pat Kenny show discussing pensions

The Pat Kenny Show on Newstalk had us on to talk about the future of pensions and to help people understand some of the looming issues in the retirement space.

It is a complex problem which is affected by everything from home-ownership to central bank interest rates. The main thing to take from it is that everybody who can start a pension, no matter how small, should do so. One of the biggest issues is the fact that people don’t even have one they can contribute to.

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Central Bank whistle-blower line unmanned

We were asked to comment on a finding by Charlie Weston in the Independent about the fact that the private disclosure (or ‘whistle-blower’) lines in the Central Bank don’t work. After the newspaper highlighted this they took action, but we were not impressed that this was only found out through the work of a journalist.

The comment we offered was very clear (below).

Compliance officer with Irish Mortgage Brokers Karl Deeter said it was not good enough that the whistleblower phone line was not being answered and emails not getting a response. “Imagine if you called 999 to report a crime and no-one answered. What would you think of our police service?”

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Central Bank mortgage arrears published for Q3 of 2016

The Central Bank published the quarterly mortgage arrears figures today, here are the key findings (taken from their press release).

The number of mortgage accounts for principal dwelling houses (PDH) in arrears fell further in the third quarter of 2016; this marks the thirteenth consecutive quarter of decline. A total of 79,562 (11 per cent) of accounts were in arrears at end-Q3, a decline of 3.1 per cent relative to Q2 2016.

The number of accounts in arrears over 90 days at end-September was 56,350 (8 per cent of total), reflecting a quarter-on-quarter decline of 2.1 per cent. This represents the twelfth consecutive decline in the number of PDH accounts in arrears over 90 days.

The majority of maturity categories of arrears, including the over 720 days’ category, declined in Q3 2016. This category recorded a fifth consecutive decline, having declined for the first time in Q3 2015.

The number of PDH mortgage accounts that were classified as restructured at end-September was 121,140. Of these restructured accounts, 88 per cent were deemed to be meeting the terms of their current …

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Pat Kenny Show on Newstalk 106, featuring Irish Mortgage Brokers

Pat Kenny had Lorcan Sirr from DIT and Karl Deeter from our company on to talk about the property market in particular in light of the changes announced by the Central Bank.

The conversation covered many topics in the market and outlined where so many issues in housing are arising.

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