Tracker mortgages: make sure you don’t miss out!

Yesterday the Examiner broke a story about tracker mortgage holders potentially missing out because they are not reading their terms and conditions. This is an issue we have seen first hand in our company, but it wasn’t due to not reading the terms and conditions, it was down to a bank error.

Recently Bank of Ireland had to put 2,000 accounts back on trackers after they mistakenly took them off and onto variable rates. AIB made the same mistake 214 times and PTsb did it 53 times.

In our own brokerages case we saw something similar recently with PTsb, they insisted to a client that no tracker was available. Then, only after the client remortgaged did they admit their error and offer it back. We represented the client in this case and insisted that all costs were also covered in reinstating the mortgage. This means paying solicitor fees, losses on clawbacks, breakage fees for the fixed rate undertaken etc.

Where this happens has tended to be where …

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If you didn’t like 100% mortgages you’ll loathe negative equity mortgages

I was interested in the front page of today’s Independent in which Charlie Weston broke a really big story about Irish banks being in advanced stages of designing ‘Negative Equity Mortgages’ (this is vastly different than the Negative Equity Loan/Short Sale Loan we have discussed previously). Essentially the bank will allow an individual to carry negative equity out of one property and move that onto another one within certain parameters.

This practice has already existed in the UK and is offered by Nationwide, Coventry and RBS, the schemes have not proved to be very popular, in part because of the stringent underwriting required. It is one thing for a client to fall into negative equity but another to actually facilitate them in compounding that fact and taking a further bet on their ability to repay. What do I mean by that?

First Loan: €200,000 Value: €150,000 Neg/Eq: €50,000

Then the €50,000 shortfall is passed into a second loan of (for example) €200,000 …

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Who is telling porkies? Lending figures v.s. Advertisements

In the first quarter of 2010 there were c. 62 business days, and from this time frame we have gotten the most recent lending figures from the Irish Bankers Federation on mortgages in Ireland. Those figures stated that there were 6,954 mortgages drawn down in the first quarter of 2010 equating to €1.22bn in lending.

Those are the hard facts.

Then come the contradictions. AIB claim to have about 40% of the mortgage market – that headline is from last November but we can assume it should still remain at above 30%, an institutional contraction of 25% would be known because it would definitely make headlines (the 40% of the market AIB has is 100% to them so if it fell to 30% that would be a 25% reduction on their single institution figures). Back on topic – if we accept that AIB is holding at least 30% of the market then that means …

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PTsb mortgage rate increases

PTsb have been fairly honest in the way they have handled their loan book over the last two years, unpopular too, however it is important to look at what they are doing, why they did it and what they will do next.

Their first mortgage rate increase came in July 2009 and it was an additional 0.5% on top of the existing variable rate mortgage. The second PTsb rate hike came at the end of January 2010 and was effective from the 1st of February 2010.

PTsb are not part of NAMA, they are benefiting by the guarantee (as are the likes of Postbank) but they are paying for that guarantee – and the only way they can continue operations without requiring an outright bailout is to increase rates, shrink their loan book and reduce costs. In that respect they are to be admired, they are doing what is necessary to remain a going concern.

The trend to watch for however, is that they will continue to increase rates, and their fixed rate offering will remain high, their ideal situation …

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Irish banks, caught in the perfect funding storm

Irish banks are caught in a perfect storm of funding costs versus lending costs which spells bad value for consumers. This is clearly seen on the deposit and lending fronts, our banks can’t offer headline rates on deposits, nor can they charge sufficiently on lending. This is creating a multi-billion Euro dilemma which will ultimately be paid for by an already unfairly burdened taxpayer.

On the deposit side foreign banks can afford to pay far more than Irish institutions meaning they can hoover up deposits rapidly and with relative ease, on the lending side, Irish banks are unable to obtain the margin they need in order to compete and remain profitable.

When it comes to leading rates for indigenous lenders you will see that Anglo, despite being nationalised and having the inherent backing of the state on all deposits, is paying the highest rates for an Irish institution on  6 month (it is the best of the Irish institutions) and 1yr deposits (it is the best across the board on 1yr deposits) – this is well above the odds they …

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Primetime 2nd February 2010: Mortgage Market Focus

Primetime took a look at the mortgage market situation in Ireland on the 2nd of February, they spoke to various industry experts as well as people on the street about their feelings on the situation. The clips below are well worth watching.

In this clip Primetime spoke to people on the street, and the general opinion was one of empathy for borrowers in trouble but the overall tone was that people didn’t necessarily want to step in and have their tax money going to bail them out. Then David Murphy interviews an anonymous borrower who is in debt trouble, as well as getting the opinion of Irish Mortgage Brokers Operations Manager Karl Deeter and Paul Joyce of the Free Legal Aid Centre (FLAC).

In the second video Pat Farrell of the IBF (Irish Bankers Federation), Stephen Kinsella (Lecturer of economics at University Limerick, and author of ‘Ireland in 2050), Pauline Blackwell of FLAC (free legal advice centre) and Ciaran Cuffe of the Green Party talk to Miriam O’Callaghan about the issues of debt and the solutions for solving …

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How much of a deposit do I need?

When making a mortgage application this is a question that many first time buyers want to know, how much money do I must I have for a deposit? Well, that kind of depends on which bank provides the mortgage finance!

Lending criteria is different for every bank/building society/lender, this goes for rates, the general underwriting criteria as well as the ‘loan to value‘, the deposit you need is 100% minus the Maximum LTV and that will give you the deposit amount you require. For instance, ICS have a maximum LTV of 92% so the deposit you need – if you are obtaining finance through them – is 100% – 92% = 8%.

What is interesting in that example is that when you go ‘sale agreed’ on a property the estate agent will ask for a security deposit and the balance of 10% at the signing of contracts, this is an example …

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