The demise of 100% Mortgages

Mortgages in Ireland continue to evolve, with 100% mortgages in Ireland now a thing of the past. We saw the 100% mortgage products die off here in 2008 because of falling asset prices, the credit crunch and liquidity problems banks are having. Assuming a mortgage will always be less than the value of a property is a misconception and for that reason many people are finding themselves in negative equity.

However, that isn’t the end of the world, if you are in negative equity the loss is ‘real’ but not ‘realised’ unless you sell up at a loss. This is perhaps not a cure but it gives some perspective to dealing with the situation. Our firm have been brokers in Dublin for quite some time, and combined we have over 100 years of experience in helping our clients get the cheapest mortgage rates and to make financial plans, however, in the current environment more than ever we are finding that broker advice is vital because there is literally so much at stake for peoples finances. Property is taking a hit, …

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Banks taking a ‘Stake’ in property deals.

There were several articles about this in the press recently, mentioning banks taking an ‘interest’ or ‘equity stake’ in certain developments. Something that the articles failed to talk about was the underlying cause? When property was booming banks were not taking an equity stake, they would finance the deals but they didn’t tend to get in on the action, so why is it that during the downturn they would start to do this?

There are two ways of looking at this, one is the way that a lender would have you believe, the others is to aim for fair comment on what is an objective view.

First of all though, it is important to look at how debt affects liquidity, if a bank is seen to have any problems people start to withdraw money, that’s not speculation, that’s fact, it happened to Northern Rock, IndyMac and several other banks since. So there is no part of the market that is fully convinced when banks say that ‘we are …

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Banks taking a 'Stake' in property deals.

There were several articles about this in the press recently, mentioning banks taking an ‘interest’ or ‘equity stake’ in certain developments. Something that the articles failed to talk about was the underlying cause? When property was booming banks were not taking an equity stake, they would finance the deals but they didn’t tend to get in on the action, so why is it that during the downturn they would start to do this?

There are two ways of looking at this, one is the way that a lender would have you believe, the others is to aim for fair comment on what is an objective view.

First of all though, it is important to look at how debt affects liquidity, if a bank is seen to have any problems people start to withdraw money, that’s not speculation, that’s fact, it happened to Northern Rock, IndyMac and several other banks since. So there is no part of the market that is fully convinced when banks say that ‘we are …

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Interest Rates: The Fed, The Bank, and the ECB

Interest rates are again in the headlines as the Fed, the Bank of England and the ECB all had meetings. It may be a little known point but in the past there was some currency co-operation, namely the Plaza Accord and two years later the Louvre Accord and although there is no official ‘strategy’ we may start to notice that central banks act with at least some degree of collusion as they try to solve global economic issues. That last sentence might confuse, on one had interest rates are not connected to currency strengths but interest rates do have an effect on inflation and inflation can be brought about by currency manipulation (namely having too much in supply).

The Irish rate of inflation thus far in 2008 dropped from 5% in June to 4.4% according to the Central Statistics Office (CSO) the article in the Times didn’t mention if this was headline or core inflation. It has been our belief for some time that …

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FSA warns banks, but will the Irish Regulator follow suit?

The FSA (Financial Services Authority) has warned specialist lenders that it has extreme reservations over how they are handling some arrears cases which may ultimately end in repossession. They felt that many lenders were overly ready to take court action against borrowers irrespective of their individual circumstances and that they focused purely on regaining the arrears.

From a lenders perspective this is a concern, if the FSA starts to come out in support of people who don’t repay their loans it can spell disaster for the financial institutions who lent out the money in good faith, if there is a prevailing belief that ‘you dont’ have to repay because the government is behind you’ it will send out the wrong message and creating an ‘unwillingness’ to repay debts and that won’t stop with banks, it can permeate into many aspects of the economy, right down to companies not paying eachother. Thankfully, the FSA stopped short of saying that they would get behind people in arrears and instead tried to keep …

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Debt Reduction Blog 6th August 2008

We have decided to start a weekly debt reduction blog, many people are very conscious of their funds and concerned over what way to utilise any money they have. So starting from today we will have some simple advice on debt reduction. Much of it is common sense but some will (hopefully!) be new information.

First, and most importantly you need to map out your finances, and that’s not as simple as saying ‘I have a current account, a savings account and a few quid with the Credit Union’, by this I mean really getting into your finances and what you are spending money on, account statements, credit card statements and also some idea of any miscellaneous expenses you might have.

Once that’s done you can sit down with a person who is a professional (this can be your broker or accountant), in some cases even a friend who knows more than you do is better than trying to go it alone if you are not financially literate (about which we’ll get back to later). Then you have to examine …

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Changing bank trends

Today we will highlight some changes that we may see come into the Irish mortgage market in the near future, as well as some suggestions from the think tank here in Irish Mortgage Brokers. The current economic climate is one where it is easy to look back and spot errors that were made, but rather than focus on the blame game we hope to consider ideas that will prevent a property asset bubble from occuring again as well as some ideas that could help promote sustainable lending, these ideas won’t beat the recession this time around but it may be good medicine for the future housing market.

1. Long term fixed rates: In the USA the prime mortgage sector is not going into the same kind of default as the rest of the sub-prime and Alt-A loans are, in the cases that they do it is down to redundancy and the other things that generally cause bad debt irrespective of the wider economy. One reason that this is happening is because loans there are taken out on a long term …

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No Bailouts, no free lunches

If you were to describe the world of finance or investment as a ‘jungle’ then it would be a fair comparison to say that the first rule of the jungle, the core principle of it, and that which must remain as a central tenet is this: Investors who take a risk should always lose if that risk doesn’t pay off, equally they should always reap the reward if it does.

Seems simple right? Wrong, we are seeing the build up for a bail out in the press on a near constant basis, the majority of which is pointing towards the construction sector or the financial sector. This is all totally wrong, and it goes against any right thinking concept of capitalism or free markets.

Banks in particular don’t like regulation and press constantly for free market principles, so they of all …

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Every which way but loose. The economy speaks….

The Irish economy is in a downturn, if you don’t know this then you have already died and either gone to heaven (where the boom is still on) or to hell (in which you are living halfway through 2009 already).

The factors involved in the Irish economic slowdown are multi-faceted, on one hand there was the property boom, then there was the corresponding financial expansion, as well as a strong dosage of greed thrown in by Joe Public. All of this was the foundation for the explosive cocktail we will one day look back upon and refer to as the ‘credit crunch’.

Mortgages are harder to place with lenders, the lenders themselves don’t have the liquidity to keep giving out money, that is the downside of fractional reserve banking. Yesterdays ESRI report showed that property, construction, and lending are all down at serious lows for the same period last year. The forecast for 2007 was to see total lending rise by €25 billion, figures for the first quarter show that only 4.4 billion was drawn, assuming the slow down continues …

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