We were delighted to take part in the Irish Independents first property video blog where we answered questions and spoke about the property market in general.
Banks have three tools (and no, it isn’t the CEO, Chairperson and Secretary!) in their box for getting into good health:
1. Operational efficiency: translation – fire a lot of people, close branches, reduce company benefit schemes etc 2. Reduce deposit pricing: pay the people who deposit with you less 3. Increase margins: on mortgages, SME loans, and every manner of service for which you can get away with it.
Which is why the news that AIB want to increase prices comes as no surprise. The first two parts of the plan are already under way, they are closing nearly 70 branches of which 44 just shut two weeks ago. They are getting rid of 2,500 staff members, that’s the ‘operational efficiency’ leg of the journey.
The deposit pricing is lower now than it was last year and last year was lower than the previous year, currently they’ll pay 2% or less for any account with a meaningful amount (greater than €50,000). While they market attractive rates for the regular saver (above a certain amount you’ll often go to a …
The leading deposit rates available at present are as follows:
1yr fixed: 3.7% with KBC (min €3,000) 1yr fixed: 3.5% with EBS (min €10,000) 2yr fixed: 3.25% with NationwideUK Ireland (min €3,000)
There are a host of rates with different maturities, from demand accounts to various monthly durations. These are just the some of rates available on an annual basis.
Here is a round up of the leading rates at present for 90% mortgages. There are different rates depending on your LTV so if you are not looking for 90% you’ll need to call so we can go through them with you.
Variable rate: AIB 3.54% 1yr fixed rate: KBC 3.99% 2yr fixed rate: BOI 4.49% 5yr fixed rate: BOI 5.29%
Mortgage rates are constantly under review and even though we might be expecting an ECB rate cut this week to 0.5% (which will be a historic low) it is highly likely that rates will sit still or even rise. The conundrum for consumers is about the rate choice, banks have just upped rates prior to any rate cut and by doing this then not passing on a rate cut they actually increase their margin significantly.
The best mortgage rates at present are below:
<50% LTV: AIB 3.34% >80% LTV: AIB 3.79% 1yr fixed: AIB 4.15% 2yr fixed: BOI 4.49% 5yr fixed: PTsb 3.7%*
*The PTsb 5 year fixed rate is a good example of a pricing discrepancy that is related to the PTsb loan book, this rate is excellent, lower than the standard AIB variable and fixed for 5 years! The reason for this is that by lending on this type of property PTsb will increase their assets (to fix the loan to deposit ratio that is too high) quicker and in return they will give up some margin.
We have made a few more bold predictions in our ‘Mortgage Market Trend Outlook 2012’ and reviewed how wrong many of our 2011 forecasts were as well.
Some of the main points thus far are:
1. That mortgage lending bottomed out in 2011. 2. That IBRC may take on some tracker loan portfolios to de-risk state owned banks (as the state already owns these loans entirely anyway). 3. That rates for existing AIB borrowers will have to go up but that for new borrowers rates may come down with changes to how prices are charged depending on risk of the proposed loan. 4. That deposit rates will start to drop. 5. That up to 25,000 mortgages will be deemed ‘unsustainable’ and that the ‘won’t pay’ contingent of arrears cases may be as high as 1 in 5.
We hope you enjoy this report, we in turn hope that we get some of the calls right!
Irish Mortgage Brokers
This is the usual update of rates available at the moment. As you’ll notice, AIB is the leader in almost every section. However, they are not necessarily lending to every client hoping to obtain finance with them – to know if they’ll be the lender of choice you need to construct the application in a manner that will ensure it shows the best aspects of the case to them.
There are lots of other lenders out there too (we deal with the pillar banks and many others as well), so looking at ‘best rate’ is perhaps different than ‘best attainable rate’.
Anyway, here is the list, if you ever want mortgage advice give us a call! 016790990
Best variable rate mortgage: AIB 3.24% (with one for 2.84% < 50% LTV)
Best 1yr fixed rate mortgage: AIB 4.15%
Best 2yr fixed rate mortgage: PTsb 3.1% < 50% LTV, otherwise AIB 4.65%
Best 3yr fixed rate mortgage: AIB 4.88%
Best 5yr fixed rate mortgage: PTsb 3.7% < 50% LTV, otherwise its AIB 5.35%
Best 10yr fixed rate mortgage: n/A 12/2011
Oh, one …
Our prediction that fixed rates would cease to exist this year is proving quite accurate, at the time we took quite a beating for making such a ‘drastic’ call in our Mortgage Market Trend Outlook report.
So far, PTsb have removed them and now Haven (and likely EBS) are set to do the same. We received notice today (see below)
The concern from a borrowers perspective is that we are getting to a point where you can’t fix a mortgage and you will be forced to ride the rate hikes that banks come up with including any that come from the ECB.
HAVEN FIXED RATE UPDATE
Due to ongoing increases in the cost of funds we will be temporarily withdrawing both new and existing business mortgage fixed rates. Significant movements on financial markets have resulted in fixed rates which would not deliver value to customers at this time. This position will, of course, remain under constant review.
New business loan offers will be honoured until close of business Monday …
We were really pleased to feature on TV3’s ‘Morning Show’ with Sybil and Martin (Brian was standing in for Martin) in a conversation about property prices and whether or not we have hit the bottom. Aoife Walsh from the Respond! Housing Agency was also there giving some great information and advice for borrowers in trouble.