Tom Parlon, preaching to the subverted.

I don’t often take swipes in this blog but today there is a difference, somebody or some one (preferably a qualified psychiatric professional) has to have a serious one to one with Tom Parlon of the Construction Industry Federation (CIF) because he has finally crossed the Rubicon that divides reality from fantasy land and turned his attention towards the utterly insane, namely by stating in the Sunday Business Post that the solution to the economy is more houses.

Just when we are hearing how there is a massive oversupply, how in three years 250,000 houses were built to satisfy a demand of about 130,000 required, and when prices are falling out he comes with this little gem. Supply outstrips demand, and his response is ‘more supply’. Perhaps it would be wiser for the CIF to employ an actual builder or engineer to do his job rather than a politician who has no experience in doing the job of the people he represents.

In his article he points out that for every 10,000 houses built that …

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Financial Literacy: What is a Mortgage? How do mortgages work?

Financial Literacy posts are designed to be more than just a simple definition, they are aimed at putting financial concepts into easily understandable terms and to give an example or two to demonstrate the answers.

Today we ask: What is a Mortgage?

By definition a mortgage is pledging a property to a lender as security in return for a mortgage loan. While a mortgage is not an actual debt it is evidence of a debt and is the legal instrument used to transfer an interest in land from an owner to a lender on condition that it will be given back to the owner once the terms of the mortgage have been satisfied.

I am a big fan of pictures so we shall use a few to show what happens.

Let’s take the example of ‘Joe’ who wants to buy a house. He must save up a deposit as loans require ‘equity’ it gives the bank some security in the sense that it means the person is vested in the purchase (they stand to lose …

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How bank margins are likely to be set in the future

We have seen the rise of the ECB (European Central Bank) over the last three years and the possibility of more is never far from the mind of the ECB. The current cost of mortgages however, is not solely tied to the prices set by the ECB, instead it is down to banks piling on lending margin [that makes loans more expensive to the consumer but more profitable to the bank].

It is important to think about this when you think about where your money is going to be going in the future, margins have widened from about 0.5% or there abouts to more than 2% in many cases meaning that there is a 1.5% uplift in the actual mark up the bank is charging, that translates into an extra €375 per month on a mortgage of €300,000 (in interest payments only!).

The chances are that we will not see margins go as low as we did in 2005-2007 any time soon, and even if we do …

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Beat the bear that is beating the bull.

There are many lessons to be garnered from a financial crisis, the downside is that for most people 99% of the lesson is delivered only in hindsight.

Today we will look at some of the lessons you can take from a financial crisis and use them (or at least understand them) to your advantage. If we accept that risk (including upside risk – which is generally well loved!) is a reality then you can do your best to look objectively at this risk and what to be aware of.

1. The Government and Banks or Big Business are not there to help you or warn you: This is fairly straight forward but a surprising number of people feel that the government should have stopped house prices from falling, now we see people calling on the government to get the housing market kick started again and the singular binding feature is that in both cases nothing is done. Banks are just the same, in the USA Bear Stearns issued statements saying they were doing well only two days before being handed …

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Financial Regulator probe into mortgage brokers & estate agents.

Yesterday the Indo had a front page story about brokers and estate agents could potentially ‘rip-off’ customers. This obviously affects the whole industry because it means that brokers and estate agents in general are sullied in the process and obviously the article was highly upsetting for many, but that doesn’t mean it was not fair and balanced.

It is especially difficult for any broker to stomach reports that say their industry is guilty of wrongdoing, but the actual solution must be for broker to be the most vociferous proponents of ensuring an investigation is completed and we must also lobby for strong retribution to any firm caught doing wrong if we are to be taken seriously by consumers.

The danger as I see it is that anything short of harsh punishment will only send out the message that yet again there is a ‘financial firm getting away with it’. The Financial Services Ombudsman’s most public moment was when they failed to have a judgement against Davy Stockbrokers adhered to in the High Court costing the tax payer hundreds of thousands …

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Financial Regulator probe into mortgage brokers & estate agents.

Yesterday the Indo had a front page story about brokers and estate agents could potentially ‘rip-off’ customers. This obviously affects the whole industry because it means that brokers and estate agents in general are sullied in the process and obviously the article was highly upsetting for many, but that doesn’t mean it was not fair and balanced.

It is especially difficult for any broker to stomach reports that say their industry is guilty of wrongdoing, but the actual solution must be for broker to be the most vociferous proponents of ensuring an investigation is completed and we must also lobby for strong retribution to any firm caught doing wrong if we are to be taken seriously by consumers.

The danger as I see it is that anything short of harsh punishment will only send out the message that yet again there is a ‘financial firm getting away with it’. The Financial Services Ombudsman’s most public moment was when they failed to have a judgement against Davy Stockbrokers adhered to in the High Court costing the tax payer hundreds of thousands …

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House prices: movements and trends in Ireland 2008

We have said for some time that house prices will fall throughout 2008, we saw a recent article in the Sunday Tribune saying that house prices would fall a further 10% in 2009. Our belief has been for some time that we will see the most dramatic drops in Q1 & 2 of 2009 and that after that the speed of decent would slow down considerably, coming to a ‘no growth’ landing some time in late 2009. There are reasons for this which we will explain below.

Firstly we have to see the market accept the rationalisation that is upon it, sites like Irishpropertywatch.com are tracking the fall in prices, yet there are still well publicised people in the construction and business communities calling for government intervention. This must be resisted as must all irrational request on the government. They hold the purse strings but that doesn’t mean they have to spend until lobbyists or special interest groups are satisfied, they must instead …

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How to get a mortgage, simple and easy steps to getting a mortgage

Mortgages scare some people and if you are reading this because you are considering a mortgage then hopefully it will help you realise that while buying a property is a big undertaking, getting a mortgage doesn’t need to be. In this article there are some questions, answers, and a few general tips to bear in mind.

Which is better, a bank or a broker? Obviously I have a bias towards brokers, a good brokerage with at least 12 agencies will be able to give you a huge selection of choice across the market and explain the pro’s and con’s of each loan that may suit you. A bank on the other hand will give you a choice of only their own products, as I always say ‘has your bank ever sent you down the road to a different institution’? If the answer is ‘no’ then you get the picture, independent choice is what brokers are for. However, if you are comfortable going direct then brokers may not be the answer for you, currently 60% of the market for residential mortgages …

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