Advantages and Disadvantages of a long-term mortgage

In a major market innovation in the Irish Mortgage Market, Finance Ireland and Avant Money have introduced new long term mortgages. While longer term mortgages have never really took off in Ireland, they are very popular in other parts of Europe and worldwide. These mortgages can be attractive to borrowers for a number of reasons, but it is important to also consider the potential downsides before making the switch.

Pros

One of the biggest advantages provided by long term mortgage products is certainty. Unlike a two or three year fixed term, a 10 or 20 year mortgage will allow your monthly mortgage repayments to remain unchanged throughout the duration of the loan. This reliable and predictable payment can be very helpful when planning out your monthly and yearly personal finances. It also can be very helpful in determining what your home will cost after factoring in interest. With a long term fixed rate, you will be able to know exactly how much the home will cost you right away, while a shorter term fixed rate will change over the lifetime …

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Spanish Bank Transforms Irish Mortgage Market

Spanish mortgage provider Avant Money has just introduced a new range of products that have the potential to transform the Irish mortgage market. Avant Money has become the first mortgage provider in Ireland to offer a 30 year, fixed rate mortgage. In this type of mortgage, the repayments will be the same every month for the entire 30 year lifetime of the loan. Avant Money’s new fixed rate mortgages have lifetimes between 15 and 30 years, and offer rates as low as 2.25 %. These new long term offerings were introduced shortly after Finance Ireland shook up the market with its innovative 20 year mortgage. These latest moves by brokers represent a huge step for the Irish market, as product offerings here are beginning to more closely resemble that of Spain and France.

Because wholesale interest rates are currently at historic lows, homeowners in Ireland are more increasingly taking out longer term fixed rate loans. Avant Money’s new portfolio of products includes 15 year, 20 year, 25 year, and 30 year fixed rate mortgages, and the rates vary based on …

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The 8 Types of Mortgages

Mortgages can be scary for first time buyers. It may help to understand the different types of mortgages when you apply for a mortgage. Here are the 8 most common types of mortgages:

Repayment Mortgage – This is the most typical mortgage. You pay back the principle you borrowed along with the interest applied in fixed (typically monthly) installments. Fixed Rate Mortgage – This means the interest rate that the bank gives you is fixed for a specified period of time. It is a safe mortgage because the monthly payments do not change over time. Standard Variable Rate (SVR) Mortgage – The rate is changed by the banks typically to reflect how the economy is doing. This rate typically follows the LIBOR or Federal Funds Rate set by the central banks. Interest-Only Mortgage – This mortgage pays off the interest before principle. After the interest is paid off, the borrower starts to pay off the principle amount he or she borrowed. Federal Housing Administration (FHA) Loan – These loans protect people who may not be able to pay back their …

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Intriguing Statistics of First-Time Buyers

Perfect Property has recently found success in finding the common budget of the average house hunter in Dublin.

While in such a crisis, this is information that has been found is essentially vital in understanding a piece to the puzzle of what keeps buyers from buying.

Of course, there are statistics on the shortage of homes compared to the increasing demand, a factor into understanding the crisis that is just as vital.

According to Perfect Property, a relatively new search engine, the average Dublin house hunter has a budget of €315,000 to purchase a home with.

A pretty substantial budget for any home buyer, however, we are still observing a vast amount of first-time buyers applying for the new state mortgage scheme, introduced just a few months prior.

A scheme that was expected to cover nearly 1,000 loans and last for an extended period of time is now lucky if it lasts the full year.

Of course, when looking in the Dublin area it can be expected that the budget for a home will …

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Bank of Ireland cuts mortgage rates

Bank of Ireland recently announced new and reduced mortgage rates, which will be available starting Friday the 16th. The highlight is cuts of fixed mortgages rates up to 0.35% for both existing customers and for first-time buyers. The bank decision ups its competition in Ireland’s reviving property market and marks Bank of Ireland as the fourth lender that has cut its rates within the last two months. KBC Bank cut its fixed rate in April, and currently has one of the lowest rates on the market. Permanent TSB and Ulster Bank are the other two lenders who have also taken similar measures.

 

Bank of Ireland’s fixed rate mortgages are based on a property’s loan to value ratio. It has cut its rates for first time buyers with an Loan to Value ratio of 81-90% by 0.25%. Customers with greater down payments and lower Loan to Values ratios also see their mortgage rates cut between 0.1%-0.25%. The greatest reductions however have been for Bank of Ireland’s existing customers, who see their mortgage rates fall by 0.35% if they have a …

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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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The sums behind ‘taxing’ the banks into a rate cut

Yesterday we were on the Sean O’Rourke show discussing variable rates on RTE Radio. We mentioned how doubling the ‘tax’ on banks won’t actually change anything. The mechanisms were briefly covered and we got a few emails asking for clarification so here it is.

The ‘levy’ was part of the Finance Act 2014 which imposed a new annual levy on financial institutions aiming to raise €150 million per annum for 3 years.

This sum is payable on October the 20th in each year (2014-2016) and it applies to a financial institution that is the holder of an Irish (or equivalent EU) banking licence or is an Irish (or equiv EU) building society that was obliged to pay DIRT – unless the amount required to pay in 2011 was not more than 100k.

The main outcry is centred on variable rates for primary home dwellers in particular. So how much of that debt is out there?

We know there are about 300,000 ‘loans’ but the quantum of debt is €39.638m which is about €3bn …

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Today FM: The Last Word on mortgages

Matt Cooper from ‘The Last Word’ had Charlie Weston (Irish Independent) on his show along with Karl Deeter to discuss mortgages, loan rates and some of the developments that are starting to happen in the marketplace.

Some of the main points of interest were that switching is available again, rates are likely to lower and that some lenders are coming out with longer term fixed rates.

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The trend in lending and deposits

We have been banging on for quite some time about the trend in mortgage and deposit rates, namely that mortgage rates will continue to rise and that deposit rates will start to drop (already happening) and this will continue downwards – in particular you’ll have to watch for zero rated fund movements.

Zero rated funds are the money that banks keep for you (a liability for them) in the likes of demand and current accounts. You used to get zero interest but in return you got free banking. Now more lenders are demanding that you keep a certain balance in the account or you get charged a fee, such as Bank of Ireland’s recent decision to require a €3,000 balance to qualify for free banking.

This creates a near ‘negative interest rate’ for people who don’t keep that sum in their current account because fees mean the bank will cover all operational cost associated with your account for regular banking activity while making money elsewhere with those funds or …

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More fixed rate mortgages disappearing

Our prediction that fixed rates would cease to exist this year is proving quite accurate, at the time we took quite a beating for making such a ‘drastic’ call in our Mortgage Market Trend Outlook report.

So far, PTsb have removed them and now Haven (and likely EBS) are set to do the same. We received notice today (see below)

The concern from a borrowers perspective is that we are getting to a point where you can’t fix a mortgage and you will be forced to ride the rate hikes that banks come up with including any that come from the ECB.

HAVEN FIXED RATE UPDATE

Due to ongoing increases in the cost of funds we will be temporarily withdrawing both new and existing business mortgage fixed rates. Significant movements on financial markets have resulted in fixed rates which would not deliver value to customers at this time.  This position will, of course, remain under constant review.

PIPELINE IMPLICATIONS

New business loan offers will be honoured until close of business Monday …

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