Bigger deposits equal less savings.

An often overlooked aspect of finance is that mortgages are actually a brand of savings, as perverse as that may sound, you have to consider what happens when you pay off a loan over time. The ‘interest’ is the part that pays for the right to use money from the future (which is what credit is, it’s moving money through time) in the here and now, the other part is a ‘capital’ repayment.

When you repay capital you are making a balance sheet gain (or for those into more up to date accounting speak, you make an improvement on your ‘statement of financial position’), even if prices stay static, over time you will eventually owe zero and that means you have a large asset which is the end result of this ‘savings’, albeit not in actual cash.

When you have a housing scarcity and rents are rising, this acts like a ‘tax’ on income, rent and mortgages are paid in after tax income, so the urge to buy when buying is cheaper and obtain a fixed outgoing (as you can …

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Newstalk: Pat Kenny talks to Irish Mortgage Brokers

Pat Kenny interviewed Karl Deeter about the Central Bank lending rules and why, in his view, they could have been done slightly differently and better. It’s an interesting insight into the difference between control-lead regulation and results-oriented regulation.

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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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Morning Ireland airs our idea to help the homeless

We were really pleased that Morning Ireland covered our joint idea with Fr. Peter McVerry on a way to help reduce pressure in the rented sector by giving landlords tax breaks in return for rent-freezes.

The idea is simple, you allow landlords to get full mortgage interest relief and offset their local property tax in return for giving the tenant a ‘rent freeze’, this can be managed via the PRTB who already link in with Revenue on some matters.

The clip explains how it would work, in the piece you’ll hear Fran McNulty discussing this idea with Karl Deeter

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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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Central Bank report on Switching mortgages

That so many people can switch their mortgage and don’t was always something that puzzled us as professional advisors.

(dowload the report here)

They found many of the things we intuitively knew but put numbers on it, issues such as inertia, complexity of product, and other issues like naive procrastination.

The numbers are not small either, savings of over €10,000 are being passed by and Irish consumers seem to be willingly paying about €65,000,000 more than they should to the lenders simply by not being more pro-active with their own finances.

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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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Drop rates so banks can lend more…

In the ongoing variable rates pricing fracas there are many points being overlooked. The first is why our mortgage rates are higher than other European countries, but we should just ignore that – at least to stay popular.

We’ll say that the government/Central Bank pressure works and banks drop their rates, what next?

We might get around to the greater number of people under price pressure for housing (the renters), but that’s unlikely, instead we’ll inadvertently drive up house prices a little more by making credit more easily available.

Because the lower the variable rate the lower the stress test. Lower rates equals more credit, it’s a fact of life in lending.

You heard it here first. The lower variable rates go the more it frees up a persons lending capability. We have covered the way the Central Bank lending rules won’t work to the point of being annoying (and we weren’t alone, the ESRI and …

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SVR’s: Comparing apples to oranges is bananas

The ongoing meme of standard variable rates being a ‘rip off’ has recently lead to a new bill being proposed by Senator Feargal Quinn. This is the most recent brainwave since the ‘tax banks to make them cut rates‘ idea.

Once again we see the politicisation of credit pricing which is avoiding many of the contingent facts on the topic which analytically is an error.

My old statistics lecturer used to say ‘comparing apples to oranges is banana’s’ and she was right, to compare two things they need more ‘likeness’ than the fact that both things happen to exist.

Here is a small list of things that occur in other jurisdictions that aren’t being mentioned.

1. Arrangement fees: Many jurisdictions (even around Europe) have arrangement fees factored into the loan, often this is 1% that the borrower pays the financial institution for setting the loan up. This reduces the need to amortize the cost of procurement …

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Can Noonan or Honohan actually do anything on variable rates? (no)

The calls to lower rates by opposition politicians such as Michael McGrath on Primetime this week is making daily headlines. Charlie Weston doing a cracking job as always bringing personal finance to the front of the paper has ensured it lead for the last two days.

This has gone from the line that ‘it’s not our place to set prices to the news broken by Martina Fitzgerald that ‘Noonan and Honohan are going to pow-wow about it’.

Don’t expect much. The official responses from both the Department of Finance and the Central Bank are below. Note in particular that Honohan makes the case for non-intervention very clear.

The email sent to both was the same:

Question: Is there any explicit power the Central Bank/Department of Finance has to compel banks to change or lower their standard variable rates? If there is can you indicate which part of any Act that the power to do …

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