What is happening with interest rates, why, and what can you do?

What is happening with interest rates?

Interest rates rise and fall, we have been in a secular-ZIRP (zero interest rate policy) environment for quite some time and as people who subscribe to the monetarist school of thought, this would always lead to inflation which we are seeing now, albeit a fairly delayed response given how long this policy has been in place.

Why?

Not too long ago the yield curve was negative 20 years into the future such was the dismal outlook of markets for any level of inflation, but then you had a pandemic, the ‘great resignation’ and between labor and supply constraints along with monetary policy effects, there is inflation you haven’t seen in 40 years. Now the curve is negative only one year into the future and the price in the money markets has risen.

Just to clarify this, many mortgage providers get their money by buying it (you buy at X + interest rate and then ‘sell’ it to borrowers at X+margin [which is ideally above the price you bought it at]). In an oversimplified manner, …

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Nuremburg property market

Nuremberg isn’t known as a significant real estate location even though it has been the economic and cultural centre of Northern Bavaria for years. But lower prices than in more prominent German cities, make buying property in Nuremberg a good investment.

The property market is growing steadily which can be seen in a renewed high level of real estate transaction volume in 2021. At EUR 1.39 billion, the sales volume was indeed about a tenth below the previous year’s figure, but it was still slightly above the average of the last five years. The top position was taken by the segment of institutional housing with a generated transaction volume of around EUR 525 million. The surpassing of last year’s figure by +6% is an indicator to a continuing interest in residential investments in Nuremberg.

The office segment showed a contradictory development in 2021 with only EUR 286 million or 61% less than the previous year due to a lack of opportunities.  Since there were no large-volume sales (above EUR 100 million) observed the highest office transaction amounted to almost EUR …

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The Frankfurt property market (Germany)

Frankfurt am Main is growing – as a stable business location, internationally important financial centre and European transportation hub. The largest city in Hesse attracts numerous young workers, older financially strong couples, but also foreign customers. For several years now, Frankfurt am Main has been one of the cities in Germany with the highest population growth. Since 2014, the number of inhabitants has risen by 7.1 per cent to almost 760,000. Given their economic importance, mass migration and associated housing demand are unlikely to decline in the foreseeable future.

Frankfurt am Main is also one of the nationwide leaders when it comes to vacancy rates for residential properties. The Main metropolis has a vacancy rate of only 0. 3 per cent, which is ahead of the already low figures in Stuttgart (0. 5 %), Hamburg (0. 5 %) and Berlin (0. 8 %). The continuing excess demand for housing in Frankfurt am Main has led to a steady rise in the average rent in the Main metropolis for years. However, a distinction must be made here between existing …

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Understanding German Mortgages.

Mortgage lenders in Germany allow you to borrow up to 100% of the property value (although you will have to cover some other costs of buying a house, such as purchase fees, with your own equity). While some German banks will be willing to finance the full amount, loans of around 80% are more common.

A major German community-oriented bank that wants to bring its model to Ireland believes it could play a role in solving the housing crisis. Sparkasse, the biggest bank in Germany, wants to create an alternative to the major commercial banks, particularly in regional towns.

The European Investment Bank has indicated support for the €200m project, said Sparkasse. That support is conditional on the proposal receiving political backing in Ireland. So far, this has been slow to materialize.

Sparkasse, which issues half of all German mortgages at rates well below standard Irish rates, believes Ireland is ideal for its municipality-owned, non-profit model.

The 200-year-old bank is aimed squarely at SMEs and the middle segment of the market. In Germany, where it has 300,000 staff in hundreds …

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How to get a mortgage Ireland

There are many factors which play a huge role in your mortgage deal. Before starting to look for a house you should check with the lenders to get a statement of how much they are able to lend you. So you will know in what price range to look for a house.

The factors are: Your credit score – past payment history and borrowing behaviour [the higher score the better. The lower credit score you have the more you overpay.] Your debts – the less debts you have the better. If you owe too much, you will have to take out smaller mortgage or pay off your debt before you apply for a mortgage. Your work history – To get a mortgage you have to provide a proof that you are employed and have steady income and job [switching jobs all the time is not a great look for lenders]. Your down payment – The lender usually wants you to put money down so they have some sort of protection. Ideally 20% of the cost of your home [so you …

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Low rate mortgage Ireland

Ireland is a country with the second-highest mortgage rates. Despite a slight dropping in 2021 the rates borrowers still overpay more than the eurozone average which is 1.27 percent. In 2021 the mortgage rates have dropped to their lowest in four years yet they are still more than double the average eurozone.

In August 2021 the fixed-rate mortgages were weighted to be 2.62 percent, down 4 basis points. The interest rate stood at 3.31 percent in August 2021, down 15 basis points year on year. So in Ireland, an average borrower is paying 180 euros a month more than in other European countries.

The reason behind it is that mortgage lending in Ireland is considered risky and banks struggle to enforce security if loans go into arrears so they must hold around three times the level of capital to safeguard against potential loan losses. The Central Bank statistics show that only in Greece the rates are higher.

This was a guest post by Agáta Hánová who interned with us in December 2021.

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Home of the Year 2021 and RIAI Awards – by Nikola Lancova

The Home if the Year is a competition series where the team behind RTÉs is searching for the most unusual and architecturally stunning private houses. The desicion is based on functionality, clever design and individuality. Each week the team of three judges visits three homes across the country. They give the house score out of 10. The home that receives the highest score goes through to the finals.

This year it was the seventh season of this competition series. In this season judges visited 21 homes across Ireland. From these 21 competitors, the judges selected seven finalists:

David O’Brien (Cork) Jennifer Sheahan (Dublin) Tanya Lee Conroy and Noel Conroy (Galway) Saara and Mike McLoughlin (Co Limerick) Sally-Ann and Ruairí Mitchell (Dublin) Kevin Desmond (Dublin) Kate and Cian O’Driscoll (Dublin)

Of the above competitors, Jennifer Sheahan from Dublin won the prize. Her house is 1800s cottage in Dublin. She bought this house in 2019, it needed a lot of work, it was damp, there was no central heating and the toilet was outside. Jennifer renovated the entire house, knocked all internal …

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Avant Money turned 1 year old, and in that time they changed everything.

Avant Money is part of the Bankinter group and they have been in the market for just one year and in that time they have been transformational in terms of what they have achieved in the current landscape.

To begin with they came in and offered the lowest rates we have ever had since the days of tracker mortgages, their fixed rates were also available for longer durations at these low rates than the other leading rates of the day. After that they brought out a suite of fixed rates which were also at the forefront of the market.

As a lender who distributes exclusively through brokers this is wonderful in our view as it drives people towards independent financial advice and greater selection. We can’t wait to see what Avant Money has coming down the line in year two!

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Pros and cons of a variable rate mortgage

A variable rate mortgage is a mortgage in which the interest rate on the outstanding balance changes periodically. Typically, these loans will have fixed, or “teaser” interest rates for a specified amount of time, after which the interest rate will change based on a variety of factors. In most cases, the initial interest rate on a variable rate loan will be lower than a fixed rate, which can be appealing for homebuyers. But it is important to be aware of the pros and cons before jumping into a variable rate loan.

Pros

Flexibility

The number one advantage of a variable rate mortgage is flexibility. With a variable rate mortgage, you don’t need to worry about penalties for things like increasing your monthly payment, or paying off your mortgage early. You also have the ability to make lump-sum payments on your mortgage throughout the year, which can be very helpful for home buyers with a fluctuating income affected by bonuses or commissions. If your life is likely to change relatively soon, and you plan on eventually moving or selling the house, …

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