Irish Independent: Quote Irish Mortgage Brokers on Central Bank limits

Mark Keenan quoted Irish Mortgage Brokers on the topic of how the Central Bank regulations were affecting prospective property buyers.

Meanwhile, Karl Deeter of Irish Mortgage Brokers described Mr Frisell’s comment as “effectively engaged in social engineering”.

“If they know that shifting people from ownership and into rental is the outcome of their policy, and they keep on doing it, then we have to assume that this is the outcome they have been pursuing,” he said.

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Sunday Independent: Irish Mortgage Brokers mentioned in housing article

We were happy to see that our concern about social engineering was mentioned in an article in the Sunday Independent by Brendan O’Connor, the quote is below.

Or does the Central Bank think it’s desirable? And why has the Central Bank taken it upon itself to decide that Irish people should move to renting property rather than buying their own house? Mortgage broker Karl Deeter has suggested the Central Bank is indulging in social engineering. What other shifts in how we live would the Central Bank like to introduce you wonder. Perhaps a one-child policy?

The issue of social engineering was first raised by us in the consultation process when it began in 2014, specifically we said this was a concern in the following two quotes taken from our submission:

This policy will ensure that many people fall prey to a policy that in protecting banks hurts their future wealth. We are, and will remain, strongly opposed to measures that have societal engineering outcomes such as this.

And later we also said that

For people who don’t have rich parents …

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Newstalk have Irish Mortgage Brokers on to discuss Central Bank rules

We were speaking on Newstalk about Central Bank rules and the impact they are having on different parts of the market. Some of the notable moments are mentioned below:

Karl Deeter of Irish Mortgage Brokers & Advisors.ie noted that high mortgage deposits are forcing people to stay in rented accommodation and fueling the housing shortage.

Deeter said: “If you’ve got people who have to come up with an extra €20,000 and they’re looking to save that, they end up renting a house for much longer than they would have. But because of that what you’re seeing is that they’re staying in a certain sector where the supply isn’t coming on board.

“It’s driving up rents. That’s almost like an additional tax which makes savings harder. It doesn’t mean that house sales have stopped or the prices aren’t rising; they are but it’s just that people aren’t borrowing to do it”.

The full story is on the Newstalk website here.

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Bigger deposits equal less savings.

An often overlooked aspect of finance is that mortgages are actually a brand of savings, as perverse as that may sound, you have to consider what happens when you pay off a loan over time. The ‘interest’ is the part that pays for the right to use money from the future (which is what credit is, it’s moving money through time) in the here and now, the other part is a ‘capital’ repayment.

When you repay capital you are making a balance sheet gain (or for those into more up to date accounting speak, you make an improvement on your ‘statement of financial position’), even if prices stay static, over time you will eventually owe zero and that means you have a large asset which is the end result of this ‘savings’, albeit not in actual cash.

When you have a housing scarcity and rents are rising, this acts like a ‘tax’ on income, rent and mortgages are paid in after tax income, so the urge to buy when buying is cheaper and obtain a fixed outgoing (as you can …

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One Big Switch findings on mortgage holders

There was an interesting infographic out today from One Big Switch showing what people have done in order to make their mortgage repayments.

It ranged from working extra hours, to taking fewer holidays and socializing less. What is interesting about this, is that nobody tends to look at the wider economy effects of high mortgage rates, and the Central Bank while saying they want to examine them, cannot and will not do anything about it.

Higher rates act like an informal ‘tax’, and as some banks are foreign owned it means taking income out of the Irish economy and funnelling it elsewhere, this affects our balance of trade and was a reason we always questioned the Patrick Honohan diktat of not having an issue if all banks were foreign owned.

This informal tax reduces expenditure in the productive economy and goes towards rationalizing zombie balance sheets, so lower rates should be a priority for everybody, but the way to get there isn’t force, it’s competition and for that reason we are hopeful that the switching campaign will be a successful …

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Irish Mortgage Brokers mentioned in the Independent

In an article by Sinead Ryan in the Independent we were quoted on several matters:

With all the talk of celebrating the Rising in 2016, it won’t extend to a rising mortgage market, says broker Karl Deeter. “The changes to lending criteria and in particular the Central Bank changes meant that while 90pc LTV (loan to value) mortgages were available, as the year progressed more banks started to withdraw them. Due to the way the figures are going to be reported in 2016 it will be a case of, ‘Want a 90pc mortgage? Get it in January or July’. And that’s because the half-year periods are going to be the times in which they are mostly available.”

One positive change, says Deeter, was that interest rates came down during the year, in particular fixed rates as banks came under pressure to explain Ireland’s excessive rates compared to those enjoyed by our EU neighbours. Although all banks rocked up at the Banking Inquiry, and most were (or tried their best to sound) contrite, the truth is that pillar Bank …

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Why people will still invest in property in 2016

We plan to go through the maths soon of why the tax breaks that ended in 2014 were a bigger driver of a slow down in the market than the Central Bank rules, this aside, people will still invest in property.

The world of investment is relative, not absolute and for the €90 billion sitting in deposit earning 1% (at best) or less the implications are clear, you have to invest somewhere or get substandard returns which will eventually be eroded by inflation.

Along with a future of quantitative easing in Europe, the likelihood of a Dollar that will get stronger and a stock market that looks toppy to many, property will remain a focus for better or worse with many people who have money.

On the capital side you have a known shortage of property, that would lead some to believe there are significant capital gains to be had. On the dividend or yield side, you have strong rents which are still showing signs of rising.

Rents are certainly very strong versus the return on deposits even when you …

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How criticism is meant to sound

In Ireland we are often publicly coy about saying what we mean, in particular as a person departs or dies the tendency is to wax lyrical when during their time or tenure the opinion a person held wasn’t in line with the following statements.

In our firm we tell it like it is, we say exactly what we mean, no matter what, that is why when you look at the critiques in this article by Colm Kelpie about the departure of Central Bank Governor Patrick Honohan you see that we stick to our guns.

There is nothing fluffy in this…

Karl Deeter, Irish Mortgage Brokers: “Whatever people say about his performance as a governor, on the consumer protection side he oversaw some of the worst regulation in the modern western world, particularly the ban on repossessions, the unworkable code of conduct on mortgage arrears, and the fact that Ireland has a persistent arrears problem unlike any other developed country in the world. They show an unwillingness to deal with some of …

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Irish Times mention Irish Mortgage Brokers in article about renting

We were quoted in a this piece by Aoife Valentine of the Irish Times which was an interesting article about the situation renters face.

When discussing the rising age of first time buyers she quoted us as we mentioned that “this is something that’s become very obvious to mortgage broker Karl Deeter.

“When I started working in lending in around 2003, people in their 20s were borrowing. Nowadays, your typical applicant is no longer 24 to35, they’re 30 to 40,” he says.

New mortgage lending rules issued by the Central Bank in January say that first-time buyers may borrow only 3-and-a-half times their gross annual income, and they must save a 10 per cent deposit on the first €220,000 of the value of the property and a 20 per cent deposit on any higher value.

Deeter believes these rules are now having an effect on who gets on the property ladder.

“What the deposit rules have done is keep people in the rental sector when they otherwise would have been …

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Two identical first time buyers walk into a bar, one qualifies, the other doesn’t

The Central Bank rules on curtailing mortgage lending have had an interesting effect, first is that we are seeing more loans draw down that might not have because people are bringing forward consumption due to the fact they won’t qualify for the same amount again in the future. This is literally the opposite of the intended effect.

Second is that it’s causing chaos for prospective buyers who may hold an exemption or need an exemption because there are quarterly reporting rules that mean banks can’t offer a new loan until they know if an old one will be drawn or become an NTU (not taken up).

Perhaps the easiest thing to do is explain it, currently you can’t get an exemption from Ulsterbank or AIB/EBS/Haven or BOI, but you can from PTsb and KBC. The banks that can’t give you one (and remember it’s only one of LTV or LTI not both) are hogtied because they have given the limit of exemptions (c. 15%-20% of lending) already in loan offers and they have to estimate both the annual and quarterly …

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