First Active set to close.

It was announced yesterday that First Active is going to close operations in Ireland. This will start with 750 job losses coming into effect via voluntary redundancies, 550 of which will be in the Republic. Unions in Ulsterbank/First Active have said that bank workers are ‘scapegoats’, we spoke about the coming job losses in April of 2008 here.

RBS have made record losses, this lead to their bailout by the UK government. On the ground here it means that at 45 locations First Active will merge with Ulsterbank branches. The removal of First Active from the market will mean there is less competition in Irish lending, this will set the basis for increased margins on lending – at a time when the ECB is dropping rates. Having said that, First Active and Ulsterbank prices are amongst the most expensive in the market with variable rates of over 6% when market leading rates are under 4%.

In …

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Generic overview of the market 2009: by sector

I was asked by a colleague in the UK to provide an overview of the Irish mortgage market, he has often advised the Bank of England in the past on the UK buy to let market, however this time it is in relation to a talk he was due to give to an international financial services group on the Irish economy. Below are the contents of my correspondence which is a no holds barred view of the mortgage market in 2009.

Remortgage: This area is finally starting to see some life again, the rate drops are filtering through and many of the people on fixed rates taken out in 2005/2006/2007  are shopping around, as always new business attracts better rates than existing customers so there is once again an argument for switching.

However, the many people who took out trackers are basically out of the market in the long term as every single lender has removed tracker mortgages from the market, in fact, if you know of a lender willing …

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Approval in Principle, the flaws.

Our firm [and I am sure many brokerage firms] are witnessing a conundrum in the market which is causing both clients and the broker a huge amount of heartache. It is that of the ‘AIP’ or ‘Approval In Principle’ not being honoured by banks over short periods of time. One lender in particular [we can’t name names] is doing that on so many cases that we no longer consider their approvals as holding any relevance.

What is an approval in principle (A.I.P. is the broker-speak we use to describe them)? It generally means that you have given a bank enough information to make a strong [and yet preliminary] decision on a case, sometimes it is subject to further documentation, or they want to get a valuation report before making a full offer, in any case an AIP is NOT a loan offer but it is as strong an indication as one can get without dealing with solicitors, in the past an AIP was honoured almost exclusively and they were seen as fundamental to …

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Mortgage Rates

Mortgage rates are normally described as a percentage, be it 5% or 3.98% the important thing to remember is that it merely interprets the cost of that credit to you as a financial debtor to the provider. When you compare rates it is also important to have an understanding of where they came from.

For instance, which rate is better an ECB (European Central Bank) tracker of 5% or a standard variable of 5%? They are both the same numerically but the tracker has a guaranteed margin the SVR (standard variable rate) does not so if the ECB change rates, for instance the way they cut rates in mid-October the standard variable might not come down the full 0.5%.

To be fair most banks have decided to pass on the ‘full’ rate cut, but what they had done in the interim of rate movements was to increase the margin on their SVR’s when the ECB was actually standing still between June of 07′ and …

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Bailout Abuse – distortions occur within 24 hours of Finance Bill

It is no secret that your author is anti-intervention, we speak at times about market distortions caused by government intervention. The recent finance bill was barely born when Irish Bankers chose to abuse some of the security and opportunities it brought about.

First of all we saw an email go out from Irish Nationwide in the UK going out touting deposit business because the bank was now fully backed by the government. One oversight we will see is that we are now going to do the job of HM Treasury. How? Simply put, the current bill backs Irish banks, not only here, but their branches abroad as well. What that translates into is the Irish state backing sterling deposits for sterling/UK based customers. Obviously there is no issue with clients themselves, they didn’t initiate the finance bill, but is it really the responsibility of the Irish state to extend this protection to other nations?

A further issue is that it will distort …

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Banks taking a ‘Stake’ in property deals.

There were several articles about this in the press recently, mentioning banks taking an ‘interest’ or ‘equity stake’ in certain developments. Something that the articles failed to talk about was the underlying cause? When property was booming banks were not taking an equity stake, they would finance the deals but they didn’t tend to get in on the action, so why is it that during the downturn they would start to do this?

There are two ways of looking at this, one is the way that a lender would have you believe, the others is to aim for fair comment on what is an objective view.

First of all though, it is important to look at how debt affects liquidity, if a bank is seen to have any problems people start to withdraw money, that’s not speculation, that’s fact, it happened to Northern Rock, IndyMac and several other banks since. So there is no part of the market that is fully convinced when banks say that ‘we are …

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Banks taking a 'Stake' in property deals.

There were several articles about this in the press recently, mentioning banks taking an ‘interest’ or ‘equity stake’ in certain developments. Something that the articles failed to talk about was the underlying cause? When property was booming banks were not taking an equity stake, they would finance the deals but they didn’t tend to get in on the action, so why is it that during the downturn they would start to do this?

There are two ways of looking at this, one is the way that a lender would have you believe, the others is to aim for fair comment on what is an objective view.

First of all though, it is important to look at how debt affects liquidity, if a bank is seen to have any problems people start to withdraw money, that’s not speculation, that’s fact, it happened to Northern Rock, IndyMac and several other banks since. So there is no part of the market that is fully convinced when banks say that ‘we are …

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Irish Mortgage Lenders, who provides mortgages in Ireland

This post is a brief account of the residential mortgage providers in the Irish mortgage market, a brief look at who they are and what kind of lending they are involved in. Many people have no idea who is who, or who owns who so this should help to clarify some of that. Of course, as a broker we can help guide you through the myriad of lenders and options, but even our expertise is not an adequate replacement

The list of lenders in residential mortgages are (in no particular order)

1. IIB Homeloans 2. Haven 3. PTsb 4. First Active 5. EBS 6. Irish Nationwide 7. ACC Bank 8. Bank of Ireland 9. Springboard 10. Start Mortgages 11. Nua Homeloans 12. GE Money 13. Leeds Building Society 14. Bank of Scotland 15. ICS 16. NIB 17. Ulsterbank 18. AIB

Who they are and what kind of lending do they do?

1. IIB Homeloans: This is ‘Irish Intercontinental Bank’ and they were once owned by Irish Life, they then got bought out by

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Euribor, the distant cousin of the ECB base rate

We have written in the past about tracker mortgages becoming an endangered species. It seems that now we are witnessing the demise of them, the interbank rates and the ECB have become so disparate to each other that one is no longer an accurate gauge of the other. What does that mean?

The ECB is the rate set by the European Central Bank, and it is the ‘base rate’ (currently 4.25%), but banks can’t generally borrow at that price and instead they buy on the ‘interbank‘ market, this is the largest market in the world in which over 1.9 Trillion is traded every single day! It is how banks access the ‘Euribor‘ market (European interbank offered rate). This is basically run as an auction and because liquidity is an issue we have seen the prices of the Euribor rise and rise, demand is outstripping supply.

Why is the Euribor rising? Simply put, fractional banking means that banks must have a constant inflow of money …

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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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