Jonathan Healy of Newstalk spoke to Karl Deeter about capping mortgage loan to values and loan to income amounts. This is a logically compelling idea but it won’t fix the supply shortage or necessarily prevent the problems we are told it will fix. It will also mean that about 2 in 3 first time buyers face an adverse effect that people who already bought didn’t have to deal with, namely that of trying to save up a 20% deposit.
Boom or bubble and will it bust or burst?
This is a piece that Karl wrote for the Irish Sun, it relates to a piece that was the lead story for the paper last week.
There is a lot of talk that we have a ‘property bubble forming’, with virtually no supply, a growing population and a trend towards smaller households as things like separation and divorce become more common, it simply lacks ‘bubble’ qualifications.
But it does have ‘boom’ written all over it, we have had many such booms and busts in Irish history, I have spent much of the last two years researching just this very thing with Frank Quinn from Blackrock College of Further Education.
We have had many price rises and falls in the last 300 years, often we saw that after a crash the next boom would result in overcrowding because back then, as now, supply became ‘short’ in the areas that it was needed.
A boom is about rapid price appreciation, it doesn’t mean you have a bubble. You could have the price of anything boom and there wouldn’t be a bubble, …
Today with Sean O’Rourke: Some of the problems with the Property Market
We were asked to discuss some of the problems in the property market with Sean O’Rourke and Philip Farrell of Real Estate Alliance.
There are issues such as gazumping with other bidders, gazumping where there are no other bidders, under-pricing to increase interest and timed viewings which create an ‘auction type environment’.
It is incredibly difficult for estate agents to manoeuvre their way through this without upsetting somebody (and it can’t be the vendor who is their ultimate client). This is why we should consider some small rules where people get punished for anti-market behaviour such as the vendor having to pay a buyer a certain sum if they pull out after the contract is signed.
This isn’t going to stymie anybody, remember, it is only after the booking deposit is paid, accepted, and the contract sent out, signed and returned that this could happen.
An unintended consequence may mean that contracts don’t get sent out very easily in the future, but can we believe that people would avoid getting contracts sent out? That’s unlikely, some kind of structural change …
Mortgage approvals up, lending figures down.
According to the IBF mortgage approvals report the numbers for April are up significantly, the figures stated that mortgage approvals are up 22.8% in a month on month basis and that it is primarily for the purchase of a house. This comes shortly after showing that in the first quarter of the year that mortgage lending is down year on year.
The activity being focused on first home buyers and movers (all looking for non apartment stock in the main) has already been well flagged on this blog.
In year on year terms this April is also up 8.7% on April 2012. A total of 1,433 mortgages to a value of €240m were approved by lenders here during the month of April. The next big question is whether or not they draw down, we have been watching this happen for a while, un-requisitioned loan facilities are common.
Another thing happening is that we are already seeing that the idea of doubling credit this year is unlikely, despite claims from the banks. If 2012 was a wash out then …
Mortgage Debt for Equity swaps
A popular idea that has been discussed in the past (and if Niamh Hennessy’s article proves correct may become working reality) is that of banks taking equity in the family home in exchange for reducing the debt on the property.
I’d like to go through this by looking at the differences in cost, the difference to the mortgage holder and to take a look at why it may not be a great idea.
The bank balance sheet currently looks like the picture to the right, the value of the asset (the loan) is based upon the amount of finance advanced, not the value of the underlying security.
Remember: When you put in your deposit, you are the first equity owner, if prices fall the owners equity is wiped out first which is why ‘negative equity’ is a talk about current value versus the mortgage secured and not just current value versus market value.
People who’s property fell 40% but who have no mortgage cannot crystallize …
TV3 Morning Show featureing Irish Mortgage Brokers and MyHome.ie
TV3 The Morning Show with Sybil and Martin from Irish Mortgage Brokers on Vimeo.
We were delighted to feature on TV3’s ‘Morning Show with Sybil and Martin’ on their monthly property slot alongside Angela Keegan from MyHome.ie
In the piece we discussed the property market as well as the financial side of it and how changes to both interest rates and taxation changes could affect buyers in the future.
TV3 ‘The Morning Show with Sybil & Martin’ featuring Irish Mortgage Brokers 11th Jan 2011
We were delighted to be part of TV3’s ‘The Morning Show, with Sybil & Martin‘. We are fans of the show and enjoy the relaxed nature of the conversational commentary style they are so adept at. In this clip we spoke about the costs of finance and the potential removal of fixed rates, while Marian Finnegan (of SherryFitzgerald) covers housing, her background is in urban economics and she lectured at both NUIG and UL before moving to SherryFitzgerald. We hope you enjoy the clip.
Mortgage Market Trend Outlook 2011
It’s a new year and we have a new set of predictions for the Irish mortgage market in 2011. In our report (get it here or click on the image) we go through them in detail (bullet points below) and we also review our forecast for 2010 to see just how inaccurate we were on the calls we made for last year.
In our report this year the main areas are:
1.Banks will push up interest rates by another 100bps or 1% (independent of any move by the ECB) costing the average borrower (loan of €200k over 25yrs) an additional €1,280 p.a. Rate hikes may start as early as this month. 2. Variable interest rates will generally start to rest at or north of 5% by 2012. The state controlled banks in particular will be forced to make some painful decisions on interest rates they charge to customers. 3. Fixed rates may be temporarily removed from the market, offered on a limited basis or priced out …
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 …