KBC move to 90% LTV

This is a very healthy sign for the mortgage market, and in our opinion it could mean that 2010 might mark the low point for credit that we have been watching out for.

In 2009 KBC under-lent, they had €1bn and didn’t lend out anywhere near that, they are also here to stay, and prior to the crisis they had about 1/8th of the market share. The fact that they are rolling out a higher loan to value is a very confident sign that

Banks have a few internal policy tools to control lending 1.    Curtailing the amount of lending – we see that already, mortgage lending is about 85% down from the peak of 40bn p.a. , peak wasn’t exactly a gauge of normal, but half of that would be normal, and even on that basis it’s down 75% – that story still has to play out 2.    Rate increases: this has the same effect as central bank rate increases, it reduces lending and everybody has increased their margins by at least 1% in the last year, you and …

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Everybody pays, even the innocent

There were many innocent parties to the credit fuelled property bubble, they are generally those who didn’t borrow, or who carried no debt, choosing instead to live frugally, and if they used debt they used it wisely. Many of these people are at the polar ends of the age spectrum, very young (who don’t even have access to credit) or much older (who have paid off their mortgages), something we will all need to get used to though is the fact that everybody is going to pay for the mess left behind, this goes farther than NAMA.

The process I am describing is already under way, the very payments system (our financial infrastructure), is going to be used to generate economic rent from the people of Ireland in order to bring in more profit to banks so that they can repair their balance sheets. This price will be paid by the taxpayer outside of the bailout money already being supplied on our behalf. This will be even paid by people who manage to …

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Mortgage Market Trend Outlook 2010

We have put together a report outlining the trends we expect to see in the Irish mortgage market in 2010. Many of the opinions have been substantiated from within industry and are evident in market information, however, we cannot say with certainty that anything mentioned is guaranteed to pass, only that we believe these trends are the ‘most likely’ and stating the reasoning behind them. You can obtain the report by clicking on the image below.

If you have any questions please feel free to call or email our firm regarding same.

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USA: Failed mortgage modification programme

Kudlow talks to Christian Weller, Center for American Progress and Dan Mitchell, Cato Institute on the topic of debt relief and mortgages in the USA, the argument for straight out write-downs on mortgages is compelling, and yet so too is the argument for allowing the market to work. Sometimes believing in the free market is seen as a ‘dirty thing’, but the side effect of trying to manage an economy from every aspect is also a bad thing (look no further than the former Eastern Bloc). Somewhere in the middle is a fair and sustainable path, but ideology bias is usually in the way before the conversation passes go, for that reason you will favour one speaker over the other quite often from the outset. However, ideology doesn’t actually get results, it is merely the platform from which a concept is launched and the better path would be to have an operational model to prove the point – although that isn’t always practical.

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Want bad advice? Pop into your local bank branch.

We felt that this story was worth reproducing in full, it is from today’s Independent, via their award winning Personal Finance editor Charlie Weston. This clearly lays it out in our opinion: getting advice in your local bank branch is perhaps the worst option available, and that puts the value of an independent broker in the light we always aim for, one of being on the customer side, the recent Sunday Times article (three posts before this) demonstrated that in a cost comparison analysis that even the Regulator themselves couldn’t get the prices brokers are able to obtain for their customers! Tuesday December 08 2009

IF you want bad advice, then pop into your local bank branch.

That is the clear message from the latest set of case studies released by Financial Services Ombudsman Joe Meade.

Mr Meade has performed an enormous service for consumers by exposing yet again the shady practices of banks, in particular, when people seek advice.

His report is shot through with examples of consumers, particularly older ones, …

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Banks are not competitive?

Roger Bootle notes that markets do quite well at the end of a recession and at the start of a recovery by drawing the benefits of the future down into the present. Roger has a lot to say on the topic of banks, in particular that of banker bonuses – he states (and we agree) that when banks become ‘too big to fail’ they essentially are oligopolies and hence they are able to pay so well. From an Irish perspective the domination of AIB and BOI put some stock in this theory.

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NAMA pricing, and why we’ll over-pay

The ‘haircuts’ we are hearing about in the papers of late are not ‘bobs’,’mullets’ or ‘short back n’ sides’, it is all about the pricing of NAMA assets, and when the pricing does become public don’t be disappointed to hear that it isn’t as big as many have felt it must be, the taxpayer is going to (ultimately) over-pay for the assets that NAMA takes on, try not to feel ripped off, in fact, overpaying is perhaps the only way we can get NAMA to work and the alternative is worse. I don’t envisage a haircut of any more than 18-20% at most if we are to ensure that banks and Government are truly working towards one aim when it comes to NAMA.

It is vital to remember – any NAMA losses will be levied upon the banks with interest, so even if there are losses (and there has to be, because there is no way anybody could get things 100% right) the tax payer is -in the long term- sheltered. While …

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Toxic traders, capitalising on volumes

Joe Saluzzi of Themis Trading (I mistakenly read the link initially as ‘the mistrading’!) have recently published a paper which accuses traders of intentionally trading huge volumes where they buy and sell for the same price and in the process make a half a cent per share. The volume of trading is fictitious ‘high frequency traders’, what they do is buy and sell and collect liquidity rebates from the exchange (note: 50 milliseconds is a huge amount of time) in this game. Do it 8 billion times and it really starts to add up.

This is just depressing, actual investors don’t get to join in because the firms engaged in this are doing it within the actual exchanges using the fastest computer technology available. They also have an unfair advantage in how they trade because they use rules intended to match buyers and sellers to their advantage, they find hidden liquidity and in essence remove it from the market as profit.

The most powerful deterrent would be to make a rule …

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Why aren't mortgages MORE expensive?

In looking at any product or service you will often hear people mention ‘supply and demand’, it is one of the foundations of Microeconomics.

Generally if supply increases prices drop, if it decreases prices rise. By how much is a question of how elastic the demand is versus supply.

We know from our day to day experience that there is still a high level of demand for mortgage finance, charting our figures back to 2005 has shown us that if we take out ‘noise’ of m/o/m figures that demand is still at relatively high levels.

However, we also know, from our daily interactions with banks that criteria is getting harder, conditions more restrictive, underwriting is more forensic, the supply of mortgages is decreasing rapidly.

Using a simple chart you would get something along the lines the one below, the blue supply and demand lines show  the situation at a certain point in time, we’ll say that is a year ago, the green line of supply shows the current situation – it has moved to the left because of the decrease.

…

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