An opportunity for home owners amidst rising house prices

The average house price in Ireland has risen 11.2% over the past year, and prices in at least 8 counties are currently rising faster than that immediately preceding the market crash. Rapidly rising prices, low interest rates, and insufficient supply are together representative of the current situation in Ireland’s property market. Although this situation has many market watchers worried about possible inflation, and is definitely a hindrance to buyers still seeking for a home at an affordable price, there is a perk that could result for homeowners with an existing mortgage.

 

This blog post will illustrate this hidden opportunity and give homeowners the necessary knowledge if they intend to pursue it.

 

For homeowners with a high standard variable or fixed rate mortgage, your interest rate is most often based directly on your Loan-to-Value  ratio (LTV). The loan to value ratio is ratio of your loan to the value of your property. Each lending institution may have a different way of calculating and determining your interest rate but in general, the higher your LTV, the higher your interest rate. …

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An increase of housing demand for millennials in the US

Real estate is on millennials to do list despite the stalled wage growth and housing market fears in the United States.

The National Association of Realtors show that the amount of first-time home buyers increased 3 percent year-over-year. They made up of 33 percent of the home mortgage market in May.

First-time home buyers can be categorized as someone who has not owned a home in the past three years.

Fannie Mae statistics shows that first-time home buyers make up of 42 percent of all home mortgages from January to April which is up 2 percent from 2016.

As interest amongst the millennials is rising in home buying, whether or not that will be a good idea is at question. The Federal Reserve just raised their interest rates which will affect the millennials in search for a …

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Shadow mortgage lending in Hong Kong

Property prices have been booming in Hong Kong over the past couple of years, and have yet to reflect any slowdown. While various governmental regulations have attempted to curb growth, a closer look at Hong Kong’s mortgage market reveals that shadow lenders are rapidly gaining ground. These mortgage lenders operate outside of financial regulations and have become the option of many buyers as more limits are placed by the Central Bank on traditional forms of financing.

 

Shadow lending describes private lending performed by institutions that are not tradition banks. These institutions can be financial intermediaries or other lenders and provide similar services as banks. These institutions do not necessarily create instability in the financial system, and can be greatly beneficial by offering financing to buyers in a time where restrictions on tradition banks are tight. However, these institutions lie outside the control of official regulatory institutions, thus their lending practices may be at greater risk if a financial downturn were to happen.

 

In most countries, the major of home loans are still made out by traditional banks, and …

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Mortgage lending gets tougher in Canada

The Canadian housing market has been growing rapidly in the past few years. Currently, many experts fear that home in cities like Toronto and Montreal are greatly overvalued, a reflection on the general instability in the Canadian economy. While Bank of Canada has yet to announce its well anticipated interest rate hike that will curb the rapidly rising house prices, lenders have already begun tightening lending rules and raising mortgage rates.

 

Early this month, major lenders Bank of Montreal, CIBC and Royal Bank of Canada have all raised rates on various types of fixed rate mortgages. Both Bank of Montreal and Royal Bank of Canada raised mortgage rates by 0.2% and rates at CIBC raised by 0.05%. The higher rates of lending is thought to precede Bank of Canada’s anticipated rate hike, which may come as soon as tomorrow.

 

Accompanying the higher mortgage rates is a series of other lending restrictions put in place by Canada’s banking regulator, The Office of the Superintendent of Financial Institutions …

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Proportion of buyers with mortgages surpass those who buy in cash in first time since market crash

Recent data reveals that the percentage of home buyers with mortgages have surpassed that of those who buy in cash. This is the first time this has happened since the property bubble and subsequent crash. On July 26th 2016, an Irish Independent/Real Estate Alliance survey reported that 60% of houses are bought with cash, now, roughly a year later, the same survey concluded that less than 30% of homes are purchased by cash buyers.

 

During the years after the housing crash, the high percentages of cash buyers was caused by higher interest rates, stricter restrictions on lending, higher rates of unemployment, and the large amount of speculators purchasing properties as assets after the original home owners have defaulted on their loans. This indicated a general distrust in the market and the squeezing out of mortgage buyers who have defaulted on their homes.

 

Central Bank economist Dermot Coates predicted in 2016 that the proportion of cash buyers was “neither sustainable nor likely to continue into the future”. …

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Mortgage approval rates are surging

The amount of mortgages approvals increased by a third last month. The vast majority was first-time buyers.

With mortgage approval rates increasing, we can expect property prices to keep rising.

The Banking and Payments Federation figures also showed the amount of the approvals is increasing.

A reason for rapid increase could be from Eoghan Murphy, the Housing Minister, reviewing the Help-to-Buy scheme. This review is a result of the Help-to-Buy scheme being accused of inflating house prices.

The increase of approvals does not mean an increase in mortgage drawdowns, as finding a home increases in difficulty. With the housing shortage, houses for sale have multiple offers so you have to outbid the others.

Forecasts predict mortgage lending to go up from €5.7 billion last year to €7.5 billion this year. Within the next three years it might even reach €13 billion.

Mortgage approvals were up from 3,046 last May to 4,124 this May. That makes a 35 percent increase in a year.

We can expect to see an increase of competition among mortgage lending banks with lower interest rates or …

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Mortgage approvals up 45% in May

Data released by the Banking and Payments Federation Ireland revealed that mortgage approvals have gone up 35% May of this year in comparison to May of 2016.

 

There were a total of 4,124 mortgages approved in May, with a combined value of €884 million. This represents an increase of 1,078 mortgages and a €275 value compared to May of 2016.

 

This increase in mortgage approvals is likely caused by lower interest rates and by greater general confidence in the economy. It also represents a continuously growing demand in the housing market, and a supply that is slowly but surely catching up.

 

First time buyer mortgage approvals in particular are up 45.8%, the value of such mortgages also saw an even more dramatic increase of 60.7% compared to May of last year. This indicates growing confidence on the part of borrowers. First time buyers are purchasing more expensive housing and are seeing housing prices rise.

 

It is …

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Bank of England limits consumer lending & borrowing

Bank of England has voiced concerns over the increasing level of consumer credit in the UK, and has instituted various restrictions on banks regarding capital buffers, mortgage lending requirements and stress testing.

 

Levels of consumer debt have been rising rapidly, well beyond the rise in income, and bank lending has facilitated it’s growth. Since last April, personal lending has increased by 7% and credit card loans have risen by 9%.

 

The central bank expressed concerns in its most recent financial stability report that lends have grown used to benign economic conditions, and thus have loosened their lending standards. The Bank of England’s Financial Policy Committee warned that though current risks to the financial system remains low, banks should still remain watchful for shocks that could be caused by economic downturns.

 

It has asked banks to increase their capital by £11.4 billion over the next 18 months, thus having a greater buffer if an economic downturn causes a shock to occur, and …

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Mortgage market update: lenders have large margins

Dan White authored a piece published in the Irish Independent on June 18 titled: Are greedy mortgage lenders about to see enormous margins squeezed? The article analyses the current mortgage market and concludes that limited competition between lenders is a source of high interest rates in the market and the consequently high margins and profits achieved by lenders. White takes note of current changes in bank’s interest rates and of a paper published by the Competition and Consumer Protection Commission to predict the future of interest rates and margins in the mortgage market.

 

The author cites a paper published by The Competition and Consumer Protection Commission stating that the Irish mortgage market is “characterised by a high concentration of a small number of lenders, limited competition between these lenders and low levels of entry by new players”. This is in part due to the fact that many foreign lenders left the Irish market after the crash. Because of the limited competition, Irish banks had free range to dramatically increase their net …

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The mortgage market for returning expats

The government has pushed hard in recent years to bring professional workers back into Ireland, welcoming plenty of new construction and dozens of foreign tech companies into the docklands. With many talented workers finding jobs elsewhere in the EU and in countries such as USA and Australia in the aftermath of the financial crisis, it is essential to Ireland’s future as a highly advanced and modern nation that its own professional workforce be well employed at home. Well government initiatives have already seen great success, many returning expats are faced with various complications when attempting to bring their families back home. Amongst these complications is the difficult process these Irish citizens have to go through to get mortgages.

 

Expats currently working and paying tax in another country are considered non-residents. Thus in the books of most major lenders, they are segregated from all other Irish citizens and placed into similar categories as foreign nationals. Thus, returning expats face stricter limits on income and on Loan to Value ratios when apply for …

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