The upside to Negative Equity?

Sometimes I write articles that are inflammatory, today’s is of that ilk, I want to point out some of the upsides to Negative Equity. They are going to be put in a list with the upsides to getting hit by the number 47 bus. Anyways… The theme of this article is that for every downside there is an upside so today I will seek to find the benefits of Negative Equity, my gut feeling is that I definitely have my work cut out for me on this post!

100% mortgage, if you took out a 100% mortgage during 2007 and put down no deposit and in turn you bought for €300,000 then what you didn’t have to do was save up 30k of a deposit – what actually have to earn to save a deposit? If you are on the higher band of tax then you paid tax at 41% and of course there is about 5% of PRSI so we’ll say that you paid almost 46% in total. A €30,000 deposit would mean you had to earn about €55,000. …

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UBS write down €37 Billion, wait…How much is a billion?

When you hear people talking about ‘A Billion’ be it a Bank talking about a billion in write-downs, or a politician talking about a billion in tax spending, it’s important to put the number of one billion in perspective.

One Billion seconds ago it was 1959, one billion minutes ago Jesus was alive, a billion hours ago our ancestors were in the stone age eating raw meat and dying of common colds. A billion days ago there we were not walking on two feet. However in monetary terms a billion dollars ago was 8 hours and 20 minutes ago at the rate it is being spent by the US Government, it’s 5 days ago at the rate the ECB has been printing it in order to avoid the credit crunch and it is also almost as much as Sierra Leone’s GDP (at the official exchange rate), that’s for the whole country for a whole year.

So when UBS came out and said that it has ‘written …

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The best mortgage brokers in Ireland.

On Friday the 28th of March there was a massive turn out for the MoneyMate and Investor Magazine Awards for 2008. We were pleased to see that yet again Irish Mortgage Brokers was short-listed for Mortgage Broker of the year for 2008 and in anticipation of a win our team happily sipped wine and mingled. The judges on the night were leading figures from the Irish Financial Services industry, the Chairman of PIBA, Jack Fitzpatrick, the head of the IBA, and the head of IMAF (these are all broker representation bodies).

I’ll cut straight to the chase, we didn’t win. Rea Mortgages won (it’s actually the 3rd year in a row that they took the title so a big Congratulations to the crew over in Rea!). I like to take the view that we did our best and sometimes you don’t get the title you seek. More importantly in 2008 there are over 1,000 mortgage brokerages in the Irish Market, out of that 1,000 only 4 get shortlisted, Irish Mortgage Brokers and Rea were the only ones who were on …

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The Fallout and the Bailout.

I feel like I keep repeating myself, the crisis is related to property and leverage. Unlike the tech bubble the issues caused by property and leverage affect the financial systems much more than technology did. The degree of leverage in the system is astounding, much of the whole wealth of the world is currently ‘borrowed’ and that’s a very scary thing, at least for me when I dwell on it.

Some institutions are leveraged differently than others but in general commercial banks are leveraged at 10 to 1 so for every dollar they actually own they owe 10. Savings institutions are about 8.4 to 1 and credit unions are the same. Brokerage firms and hedge-funds are at 32 to 1. Be afraid, that means for every Euro or Dollar they have they owe thirty two! Is there any lender out there that would give you thirty two times earnings? If you average out all institutions you come out with an over all leverage of about 12 to 1.

But stop right there… this doesn’t include derivatives! and they are not …

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Finance returns to the year 1400

I didn’t think in the year 2000 that towards the end of the first decade we would see the financial world turning to the things that were of value six hundred years ago. Initially with all of the fuss being made and the news of how the Internet was changing the world I figured that we would be living in a society where everything worked on-line. People are slower to adapt than technology, indeed, blogging was around for years before Irish Mortgage Brokers embraced it as part of our drive to promote economical knowledge amongst our clients.

However, no matter how I strain to think back on the turn of the millennium and century, there was no part of me that thought Gold would be the big news on the market. Seriously! Gold was fought for during the conquest of South America (I prefer the more accurate grammatical description of ‘rape and murder’ of South America), and Kingdoms often financed their sovereignties with gold, it was held in reserve …

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Do you need a ‘Reality Check’? Property prices rationalise.

According to Britain’s largest property portal Rightmove.co.uk sellers need a ‘reality check’ when selling their according to a story published by Reuters. In the UK the unsold property stock has reached record proportions, currently it is seeing 35,000 per week come online, rightmove have about 90% of the property listed on the market on their site so it’s an even better indicator than our own versions which would be daft.ie and myhome.ie.

They have said that people need to embrace ‘smart pricing’, here we have taken to calling this ‘priced to sell’ or ‘price adjustment’ but in the end of the day the message is clear, drop your prices if you want to sell. The interesting aspect of the rightmove analysis is that many of the people advertising property are trading up and although they want to buy at a bargain they want to sell for the highest price attainable, its an interesting juxtaposition.

I think we are seeing the same thing in Ireland with sellers hoping for high …

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Do you need a 'Reality Check'? Property prices rationalise.

According to Britain’s largest property portal Rightmove.co.uk sellers need a ‘reality check’ when selling their according to a story published by Reuters. In the UK the unsold property stock has reached record proportions, currently it is seeing 35,000 per week come online, rightmove have about 90% of the property listed on the market on their site so it’s an even better indicator than our own versions which would be daft.ie and myhome.ie.

They have said that people need to embrace ‘smart pricing’, here we have taken to calling this ‘priced to sell’ or ‘price adjustment’ but in the end of the day the message is clear, drop your prices if you want to sell. The interesting aspect of the rightmove analysis is that many of the people advertising property are trading up and although they want to buy at a bargain they want to sell for the highest price attainable, its an interesting juxtaposition.

I think we are seeing the same thing in Ireland with sellers hoping for high …

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The Banks want to issue a slap on the wrist to those pesky HedgeFunds!

Irish Banks are considering legal action against several hedge funds in the belief that they gave false information about them in order to drive down their stock price and therefore make money by short-selling their stocks. If the regulator didn’t hammer the banks for the several million euro that the Irish Consumers were ripped off of in various debacles from account fees to forex charges then why should they get involved in this row?

The Regulator is there to enforce proper conduct in the Irish market, if the hedge-funds in question are not based here (chances are their administration might be though) then they will have little recourse, further more, the Irish Banks should be levied more if the Regulator does get involved, Irish Financial institutions have to pay for 50% of the Financial Regulators budget requirements, if they are going to be called in as inter-company police then the levy on firms using them for that purpose should increase. …

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What are the best mortgage rates? Mortgage Interest Rates explained.

What are the best Irish mortgage rates? What are interest rates and where do they come from? These are all good questions and in today’s post I hope to answer some of them.

Often I find that people call me and ask ‘what’s the best rate’ and then there is silence on the other end of the phone as they await an answer. The truth is that at any given time there is a ‘best mortgage rate’ out there, but normally there are restrictions surrounding it which inhibit the ability for most borrowers to avail of them.

We have come out of eight rate hikes which began at the end of 2005, and in an upward rate market people often feel that their old loan has become expensive, in fact it’s not necessarily the case that the ‘old loan’ is exceptionally dear, its that the rate market has gone up and therefore the cost of all loans has gone up, when we talk about the greater ‘debt burden’ that’s what we are referring to, because car loans, higher purchase, leases, …

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The ECB won’t cut rates? A central bank doing exactly what it should.

The Fed is still trying to bail out the US economy, there must be a fundamental belief there that a recession is the worst thing in the world. Personally I would feel that the 1,000,000 lives lost in Iraq outweigh the damage a recession might do but for some reason the efforts to end the war pale in comparison to what politicians and policy makers are willing to do to avoid an economic downturn.

Bear Stearns was bought for $2 a share by JP Morgan Chase, their stock price was about $38 recently, and the money to do the bailout was Fed backed. In fact the Fed is evoking laws designed during the great depression to lend direct to banks.

The USA has recession aversion, it’s almost like the economy there is one giant dog dry heaving to Pavlov’s recession bell. The issue is that the budget still has to be met, these bailouts cost money and the money …

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