Late loan payments continue to rise

The Central Bank of Ireland reports that the total amount of mortgages that are now classified as long-term arrears have hit record highs, topping the charts at almost 6 billion euro. There are many types of properties that can and have become part of this number, but the largest group tends to be that of more residential properties.

In the previous quarter, mortgages in arrears were down significantly. Sadly, the largest category in mortgages in arrears, residential properties that are two years or above in late payments, is still increasing. The buy-to-let sector has been the largest subcategory of residential properties in arrears; 17.62% of the total is in arrears.

In April 2019, only 118 of all applications of mortgages for buy-to-let properties were approved while in April 2018 154 mortgages were approved. There was a 30% decrease within the same months separated by only one year, according to the Banking and Payments Federation Ireland (BPFI).

This huge scale down may be due to Brexit, or perhaps the seeming unreliability of buy-to-let properties ability to bring in …

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Credit union caps

The change in the economic climate of Ireland in the last few months has caused many money lending institutions to change their policies. Credit unions are among the most common to change, with the current amount totaling 36 unions all across the state.

The largest adjustment to these businesses are focused around savings accounts of current members. People who are utilizing these saving tools are now being asked to keep their savings below a certain amount.

Some of the caps imposed on these deposit accounts range from €15,000 to €40,000, causing major problems for many of the current users. If an account is above the cap amount, the account owner is required to find an alternative place to store these additional funds in less than a month.

One of the largest draws towards credit unions for people is the ability to get higher interest rates on savings and lower interest rates on loans. High interest rates can be very beneficial on savings but without a significant amount of funds able to be held in an account you …

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How the Mortgage Market can Return to Normal Levels

Last week the Institute of Banking held a forum on behalf of the Irish Mortgage market in which Deputy Governor Ed Sibley delivered a speech addressing much of what is prevalent in the country today.

It began by briefing the current housing situation in Ireland. Simply put, it’s dreadful. As many are on the pursuit of suitable housing the “toxic legacies of the financial crisis” are proceeding to cause mayhem throughout the nation.

The forum started by discussing the role of the central bank. The central bank plays a much greater part in the overall mortgage market than one may think.

It is up to the central bank to ensure that “the economic and social good of mortgage provision is prudent, sustainable, and that the best interests of consumers are protected. “

The central bank has had to take extensive interventionist movements in the Irish mortgage market since the financial crisis as Ireland typically experiences extreme economic and human hardships when these certain risks arise.

In order for the mortgage market to function properly, consumers …

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Help-to-buy incentive under scrutiny

This past Sunday, current Housing Minister Eoghan Murphy said on RTE’s The Week in Politics that the Help-to-Buy initiative introduced by his predecessor is currently under review. Since its introduction in January under former Finance Minister Michael Noonan and former Housing Minister Simon Coveney, the Help-to-Buy initiative has already received nearly 7,000 applicants and has successfully helped a great percentage of them with the purchase or building of their first home. However, the initiative has recently come under fire for exacerbating the problems it intended to solve, and there is speculation that it may be dissolved.

 

The purpose of the Help-to-Buy incentive was to encourage first buyers to enter the market by helping applicants with their deposit through the refund of applicants’ income tax and DIRT other the past 4 years. It applies to first time buyers who either purchase or build new residential properties, and allows them to receive 5% of the purchase price of their new home, with an upward limit of €20,000. It is hoped that the incentive would help more people climb the property ladder, …

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Mortgage Market Update

The Financial Broker gives readers an overview on currently property prices and mortgage market conditions.

The Central Statistics Office published a report showing price inflation on property had increased 10.7% in the past year up to February. A similar report reveal how the number of newly build housing last year was 14,932 units when estimates denote a demand of up to 50,000 units. These numbers illustrate a problem in the current mortgage market, which this article pinpoints the causes of. The author laments about rising property prices, arguing that many potential home buyers have missed out on the prime time to purchase property, and are currently no long capable of affording the housing of their choice at an acceptable price.

The author attributes the current housing price and rent inflation in Ireland as consequences of a lack of supply in urban areas instead of lax macro-prudential regulations. In fact, she argues that current Central Bank regulations are too restrictive, and thus have prevented demanders from being able to locate and buy affordable housing. While the prudential regulations have lowered the …

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Highlights from the 2017 Macro-Financial Review

The Central Bank of Ireland published today it’s 2017 Macro-Financial Review. The report gives an overview of the Irish economy and the state of its financial environment. The aim of the report is to help protect the interests of the Bank’s stakeholders, these include: the Irish people, national and international authorities, and other participants in the financial market.

Sharon Donnery, the Central Bank’s deputy governor, introduced the report in a speech this morning. She states that the state of the general economy is improving, but also mentions a few outstanding issues that have the potential to negatively impact the economy’s improvement.

The report notes that much of the uncertainty in the Irish economy is a consequence of Brexit. The depreciation of the sterling against the euro and decreasing consumer spending in the UK has already put a burden on export industries. Uncertainties relating to Brexit may also arise from new trade barriers, trade policies and changes in international taxation.

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Irish Mortgage Brokers mentioned in the Independent

In an article by Sinead Ryan in the Independent we were quoted on several matters:

With all the talk of celebrating the Rising in 2016, it won’t extend to a rising mortgage market, says broker Karl Deeter. “The changes to lending criteria and in particular the Central Bank changes meant that while 90pc LTV (loan to value) mortgages were available, as the year progressed more banks started to withdraw them. Due to the way the figures are going to be reported in 2016 it will be a case of, ‘Want a 90pc mortgage? Get it in January or July’. And that’s because the half-year periods are going to be the times in which they are mostly available.”

One positive change, says Deeter, was that interest rates came down during the year, in particular fixed rates as banks came under pressure to explain Ireland’s excessive rates compared to those enjoyed by our EU neighbours. Although all banks rocked up at the Banking Inquiry, and most were (or tried their best to sound) contrite, the truth is that pillar Bank …

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Drop rates so banks can lend more…

In the ongoing variable rates pricing fracas there are many points being overlooked. The first is why our mortgage rates are higher than other European countries, but we should just ignore that – at least to stay popular.

We’ll say that the government/Central Bank pressure works and banks drop their rates, what next?

We might get around to the greater number of people under price pressure for housing (the renters), but that’s unlikely, instead we’ll inadvertently drive up house prices a little more by making credit more easily available.

Because the lower the variable rate the lower the stress test. Lower rates equals more credit, it’s a fact of life in lending.

You heard it here first. The lower variable rates go the more it frees up a persons lending capability. We have covered the way the Central Bank lending rules won’t work to the point of being annoying (and we weren’t alone, the ESRI and …

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Can Noonan or Honohan actually do anything on variable rates? (no)

The calls to lower rates by opposition politicians such as Michael McGrath on Primetime this week is making daily headlines. Charlie Weston doing a cracking job as always bringing personal finance to the front of the paper has ensured it lead for the last two days.

This has gone from the line that ‘it’s not our place to set prices to the news broken by Martina Fitzgerald that ‘Noonan and Honohan are going to pow-wow about it’.

Don’t expect much. The official responses from both the Department of Finance and the Central Bank are below. Note in particular that Honohan makes the case for non-intervention very clear.

The email sent to both was the same:

Question: Is there any explicit power the Central Bank/Department of Finance has to compel banks to change or lower their standard variable rates? If there is can you indicate which part of any Act that the power to do …

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The ESRI and the Central Bank butt heads.

This headline appeared in the Indo today. We agree with the idea of a safer market, but also agree with the ESRI on this, that it was badly timed, inappropriate and will actually cause more problems than it fixes due to being badly timed.

We would agree, our submission on the subject was one of the few that articulated the problems, why the moves wouldn’t prevent boom-bust and gave empirical evidence supporting same. Meanwhile many others were falling over themselves to commend Patrick Honohan and the Central Bank for being such good regulators.

They may have insulated the banks, but it’s at the expense of a market that will not provide for all of the people that need housing, in doing this it also helps to encourage speculation as one by-product is higher yields which re-attract investors into a market.

The ESRI have articulated this better than we did, and we support their findings. Oddly, the person behind the statements was the best economist the Central …

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