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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Bank of Ireland cuts mortgage rates

Bank of Ireland recently announced new and reduced mortgage rates, which will be available starting Friday the 16th. The highlight is cuts of fixed mortgages rates up to 0.35% for both existing customers and for first-time buyers. The bank decision ups its competition in Ireland’s reviving property market and marks Bank of Ireland as the fourth lender that has cut its rates within the last two months. KBC Bank cut its fixed rate in April, and currently has one of the lowest rates on the market. Permanent TSB and Ulster Bank are the other two lenders who have also taken similar measures.

 

Bank of Ireland’s fixed rate mortgages are based on a property’s loan to value ratio. It has cut its rates for first time buyers with an Loan to Value ratio of 81-90% by 0.25%. Customers with greater down payments and lower Loan to Values ratios also see their mortgage rates cut between 0.1%-0.25%. The greatest reductions however have been for Bank of Ireland’s existing customers, who see their mortgage rates fall by 0.35% if they have a …

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PTsb compel clients to go for variable rates as fixed rates start at 7.25% (no joke)

We thought a client of ours was joking when they said they were being told that as an existing customer of PTsb on their mortgage that the only fixed rates they were getting offered were more than 7%.

It’s a standard residential loan rolling off a 1 year fixed rate, the ‘existing business rates’ (to you and me that’s ‘the loyal customer rates’) are so awful that we can think of no reason for why anybody would want to borrow from PTsb unless they never want fixed rates or need the cashback offer they have.

As a broker we obviously have to consider our past, present and future relationship with any lender, one way to sour that relationship is to take clients who are on a reasonable product and price and then strip them of choice (which is what a rate of over 7% effectively does) when the initial honeymoon is over.

For that reason we would remind people to consider their lender proposition very carefully and to get independent advice because when you go direct you’ll never get to …

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Irish Times mentions Irish Mortgage Brokers on ECB rate move

The Irish Times mentioned Irish Mortgage Brokers in their story by Arthur Beesley and Eoin Burke-Kennedy on the rate cut by the ECB from 0.05% to 0%. The implications for borrowers are minimal, it’s more about ‘signalling’ to the market, the good news for debtors is that rates look set to stay low, which is awful news for savers.

“Mortgage broker Karl Deeter said monthly repayments on a 25-year €200,000 loan would drop by €5. The refusal of Irish banks to pass a succession of ECB rate cuts to variable rate mortgages has long been contentious.”

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Independent Newspaper mentions Irish Mortgage Brokers

In an article today about mortgages by John Cradden of the Irish Independent we were quoted extensively regarding our thoughts on loans, extracts are below:

Last month saw the official launch of a new mortgage lender here in the form of Australian firm Pepper, who will be lending to the self-employed and those who got into arrears during the downturn but are now back on track.

“Up to now, if you had credit issues you were virtually unbankable, that is set to change,” said Karl Deeter of Irish Mortgage Brokers. “Equally, as banks add bells and whistles to their product suite, you’ll see some will be about flexibility rather than price and that’s a sign of competition in product differentiation coming through.”

He adds that rates will improve with the new competition. “This was what happened in the last credit cycle and will happen again so time will take care of that, but Ireland also has unusually high risk associated with our loans so that has to be factored in.”

The cashback offers are another popular incentive, with …

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The big switch

The time is coming near where One Big Switch say they will be shaking up the mortgage market in Ireland by using the power of group persuasion to get a bank to make an offer that is lower than that which is currently available.

Is this likely to succeed? In particular given that even the Central Bank and Government have failed when it comes to demanding that banks lower their rates?

We would think ‘yes’, because this campaign speaks to banks in the language they understand most, that of customers and money. With loan growth becoming much slower and aggregate credit continuously shrinking for the last eight years, it means that banks don’t have a large amount of choices for new business.

Attrition will be part of the plan and it isn’t one shackled by the Central Bank lending rules because they don’t apply to switcher loans where there is not a top up element to the loan. This means you take a proven credit track record and equity in the property and you obtain what we refer to as …

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Fixed rate comparison Ireland

When it comes to fixed mortgage rates in Ireland there is a little confusion, the first being about ‘whether to fix or not’ and secondly, if by doing so will you lose out should Irish lenders choose to lower their mortgage rates.

The simple answer is that if you fix your mortgage you may win or lose depending on what rates do, but that is missing the point of why you fix to begin with. It provides you with certainty of payments and often there is a premium due because of this, in simple terms, you pay a bit more for the ‘fixed’ assurance.

Below is a list of some of the best fixed rates in Ireland as well as who offers them.

Best 3yr fixed rate: 3.6% offered by PTsb and Bank of Ireland

(note: you can get better again by going with KBC and opening an account which gets you 3.55%)

Best 5yr fixed rate: 3.8% offered by Ulsterbank, BOI and Haven/AIB

These are ‘tiered variable rates’ meanining you have to have a low loan to value or …

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Talking Money – Switch your mortgage to save

This week on ‘Talking Money’ Karl Deeter and Jill Kerby were discussing ‘switching’ with Cormac on RTE’s Drivetime. It was coincidental that many of the points we made were reinforced by the Central Bank findings this week on mortgage switching on points such as assertive customer behaviour being important and not allowing inertia to hold people back.

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Drivetime RTE: Mary Wilson speaks to us about mortgage rates, 22nd May 2015

We spoke with Mary Wilson of Drivetime on RTE about mortgage rates and what the implications were of the changes Michael Noonan (Irish Minister of Finance) announced that day. We also read through the Central Bank report on the subject and considered the findings of their analysis in terms of the impact it might have on borrowers.

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