Central Bank findings on interest only mortgages

The Central Bank released some findings on interest only mortgages (below), we’ll follow up with some commentary and interpretation soon.

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The research analyses the loan characteristics, including loan performance, of mortgages originated on interest-only terms in Ireland.

The main findings of the research are:

While interest-only arrangements have been widely used as a means of temporary forbearance to deal with the current mortgage arrears crisis, mortgages were also originated on interest-only terms during the height of the boom. Between 2005 and 2008, interest-only mortgages were mainly issued to buy-to-let investors on tracker mortgages and at high loan-to-value ratios. Interest-only mortgages were more likely to be issued to buy-to-let borrowers in Dublin and for the purchase of apartments than standard mortgages. The arrears rates on these mortgages are higher than standard mortgages. A significant number of interest-only mortgages are due to revert to principal-and-interest repayments in the next 2 years. The resulting higher repayments for these borrowers could lead to an increase in mortgage arrears. 44 per cent of the buy-to-let interest only borrowers will …

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Banks may have the upper hand in the tracker debate

In the Irish Times Barry O’Halloran covered a story on trackers which looks at a case by Alan Grant of DNG against PTsb who have claimed they have the right to seek full repayments on mortgages and not just interest only.

Our readings of loan offers are that there is an agreed period which is subject to reviews. PTsb have been seeking repayments on investment loans since 2010. The idea that it shouldn’t be allowed under the Consumer Credit Act 1995 is probably going to prove contentious because when you buy an investment property you are not acting as a consumer meaning the provisions may well not apply.

You can be a consumer for a financial service even if you are a credit union or a company with a turnover below €3,000,000 but for the head of mortgages in one of the countries largest estate agents there is a dual issue at hand, firstly Mr. Grant should be expert enough in mortgages to carry out the role as a mortgage advisor (bearing in …

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Banks have a message for you, ‘Get off my loan book!’

We have been saying for quite some time that banks would start to find ways to induce people away from their loan book. The first mention is from a post here back inn 2008 where we mentioned ‘early redemption bonuses‘  and then we also said something similar which Niall Brady from the Sunday Times picked up on in July of 2009.

The basic premise is that banks want rid of certain types of borrowers and loans in particular, and in some cases loans in general. We’ll take a look at the loans that bother them the most below.

1: Sub-Prime loans: this is definitely the clearing house recently Fresh Mortgages sold their loan book in a private deal believed to be well below 30c on the euro. This was for a book that was secured on sub-prime mortgages and serviced via a centre in Northern Ireland, something Fresh did was to offer their borrowers an inducement to go elsewhere or pay …

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