ECB Base rate increased 0.25% to 4.25% today

The ECB (European Central Bank) changed its base rate today to 4.25% which is an increase of 0.25%, the previous base rate of 4% had been left unchanged since its inception in June of 2007.

The move, while not favoured by borrowers, is vital in order to control Eurozone inflation which has been running well above the ‘at or just below 2%’ level that the ECB has intended to adhere to. In the first quarter of the year many commentators were saying that they believed we would see a rate reduction in the summer, this blog on the other hand argued otherwise in articles which were posted in mid March and again in mid April. As recently as May professional commentators (our crew is more along the line of humble observers!) …

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House prices are on the move!

Sherry FitzGerald said yesterday that property prices fell 4.5% in the second quarter of the year having fallen 1.9% in the first quarter. The results to the 12 months to June showed that prices fell 10.2%. So house prices are moving, albeit down.

The factors that are affecting property are mixed and many, primarily the prices are/were too high, and any time assets receive valuations above and beyond what they merit you will see market corrections. We are also seeing a unique time in banking history, and in many respects the property price correction is not dissimilar to the 1929 crash because both of them focus around leverage, I’ll continue on that point in a later blog about ‘similarities in economic history’.

Cheap money from central banks is also on the wane, in fact almost every economy has increased rates in an effort to bring inflation under control, mixed in with the lending liquidity issues we see a two fold effect. First is that there is not as much money to lend, even …

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Online Mortgages for consumers and electronic documents.

The next phase of the Irish mortgage market, and certainly the Irish broker market is to overcome the intensive levels of paper creation and associated running costs, one UK based firm has come out stating that technology will be the key to the survival of the intermediary market.

Paper costs accrue to more than just the physical paper, the storage areas required to hold them, the additional stationary, photocopiers, and toner cartridges, paper also has a massive ‘human’ cost in terms of man hours. If the market was to gain efficiencies in document storage and movement then it would make sense that a document would only ever need to be copied once.

Currently a broker will obtain documents, copy them, verify them, and then send them on to a lender who will copy them once they witness that they have been verified and usually they will scan them in as well. This means that the broker copied them (and maybe scanned them), then the lender copies …

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A tale of two commissions.

It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of light, it was the season of darkness, it was the spring of hope, it was the winter of despair.

Some of you may recognise this line from ‘A Tale of Two Cities’ by Charles Dickens, however, I am not a classical scholar, instead it sums up my monetary sentiments for 2008. On one hand we are seeing property prices [the very foundation of the majority of Irish wealth] wither away, as global conditions worse, especially in the USA where house prices are now falling quicker than they did during the Great Depression.

There has been more than a few articles in this blog about the current issues in the broker market, the description I would use to describe it at the moment tends to modulate between ‘ugly’ and …

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Branch distribution by banks is dead.

We have seen headlines heralding the ‘death’ of brokers, however perhaps we need to look at the whole financial distribution market and instead of worrying about brokers take an objective view of enterprise, efficiency, and distribution in general. I did some research on this by looking at the American market, talking to other brokers, by looking at operational efficiency planning in other countries and markets, and lastly was by putting up a post on which is a site where regular folks who are bearish on property (and into economics) hang out.

There are a few sites out there that I like to browse in order to gauge public sentiment, but the ‘Pin’ as its referred to by the folks who frequent it is perhaps the most open and honest, and it tends to have some heavy economic technicians frequenting it. Granted, the tone of the site is not one that perhaps everybody agrees with but the calibre of the posters knowledge is well above the average Internet forum.

Regarding the …

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A time for brokers to stand up for themselves.

Personal Touch Financial Services in the U.K. is going to put up a ‘Rogues Gallery’ on their website in order to criticise lenders who are directly undercutting the broker market. What is starting to surface in the UK is a price structure that embraces the ‘Direct Model’ rather than the ‘Independent Model’, what this means is that banks would rather have people call directly into their branch or ring them on their 1850-McCallCentre line rather than see a market that is dominated by independent advice. One of the main reasons is that they can juice Joe Public even more.

Recently Ulster Bank withdrew completely so that it can ‘cross-sell customers other high-margin products, like credit cards and overdrafts’ [quote sourced from]. It would be fair comment that if they got the mortgage via a broker they would probably not get the chance cross sell these products, and this is therefore the main reason for any bank to leave the broker market or to try and compete with brokers using such …

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Lose your collusion… Irish Banks show just how little they care.

As George Bush once said ‘Fool me once, shame on you, fool me twice…shame…well you’re not gonna fool me twice’. Banks however have done this and so much more in the last few weeks that how it’s not front page news has me flabbergasted! Are the Irish public meant to really believe the picture we are seeing unfold? Apparently so…..

Let’s look at the picture so far and put it in a time-line, then we can look at that time-line and try to discern if it was sheer co-incidence or opportunism that has lead to the moves in the market.

Tuesday 4th December: Ulsterbank cut brokers income by 50%, no explanation, and done by email. It would be laughable if it were not so serious.

Tuesday 11th December: PermanentTSB announce brokers income will be cut, to be fair they gave a lot of warning, because of the size of PTsb this action kicked off an industrial dispute, nobody cared about ulsterbank but PTsb was a market giant.

Then came the waiting game, to see what the result of the industrial …

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Ulsterbank and First Active pinch on the back of RBOS woes.

This week Ulsterbank again made news in announcing that they were ‘leaving the broker market’ as of the end of May 2008. From the perspective of this brokerage you ‘can’t leave something you didn’t have’, Ulster had less than 5% share of the market and they never really secured a product/service offering that gave them significant inroads into the broker arena, for that reason, getting out of a channel they would never be able to operate in successfully is a wise decision.

In a statement they mentioned that they will instead focus on their existing client bank, what that means is that if you hold an Ulsterbank Account you can expect a phone call some time soon inviting you for a ‘financial review’ or something along those lines, while it is an excellent idea to review your finances always be aware that direct product producers such as Ulsterbank are not obliged to let you see what is available on the wider market, in fact, their advisors need only offer whatever limited options the bank create. Its like having a sweet-tooth …

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