What you need to know about ECB’s raising interest rates

The European Central Bank raised interest charges more than what they initially announced. Over the past few months, the rates have increased by around 1.25%. The clients have not yet been reached by institutions including Bank of Ireland and Permanent TSB.

Customers have a lot of pain for the future because there are a lot of uncertainties. They now have to deal with high mortgage interest rates in addition to inflation, rising electricity and fuel costs. New customers face a direct problem because their five-year fixed rates increase by 2%. As a first-time buyer, you will receive a rate of 5.95%. Long-term fixed loans rise by 1.49% to 1.58%. (depending on size and running time). As a result, banks such as AIB, ESB, and Haven must raise their rates for new and switching customers. The current customers are not affected. Customers with tracker mortgages face an increase in interest rates due to contractual obligations. Some of the new customers must take an expensive rate, which means they must pay 240€ more than before the ECB increase.

If the AIB, EBS, …

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Compare Mortgage Rates of Irish Lenders

The ECB will continue to raise the interest charges over 2% by the end of the year 2022. In 2023 it will be up to over 3%. If you are a first time buyer you must have 10% of the  whole house price. If you have more than 10%, your rates will be lower. There are a lot of products out there and you must have a look at which one is the best for you. There are  products for first time buyer, second time buyer, self builder and switcher. Some of them have  some special products like green mortgages or for renovator.  

The following companies were compared: Bank of Ireland,  Finance Ireland, Avant Money Mortgages, ICS Mortgages,  Permanent TSB, Haven, AIB, EBS. 

Bank of Ireland has a lot of offers when you get a mortgage. If you get your first mortgage with this bank, they will give you 2000€ for saving up. They also have a  cashback system, so if you take a mortgage there they will give you 2% cashback of the mortgage and 1% extra cashback if …

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What is happening with interest rates, why, and what can you do?

What is happening with interest rates?

Interest rates rise and fall, we have been in a secular-ZIRP (zero interest rate policy) environment for quite some time and as people who subscribe to the monetarist school of thought, this would always lead to inflation which we are seeing now, albeit a fairly delayed response given how long this policy has been in place.

Why?

Not too long ago the yield curve was negative 20 years into the future such was the dismal outlook of markets for any level of inflation, but then you had a pandemic, the ‘great resignation’ and between labor and supply constraints along with monetary policy effects, there is inflation you haven’t seen in 40 years. Now the curve is negative only one year into the future and the price in the money markets has risen.

Just to clarify this, many mortgage providers get their money by buying it (you buy at X + interest rate and then ‘sell’ it to borrowers at X+margin [which is ideally above the price you bought it at]). In an oversimplified manner, …

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Pros and cons of a variable rate mortgage

A variable rate mortgage is a mortgage in which the interest rate on the outstanding balance changes periodically. Typically, these loans will have fixed, or “teaser” interest rates for a specified amount of time, after which the interest rate will change based on a variety of factors. In most cases, the initial interest rate on a variable rate loan will be lower than a fixed rate, which can be appealing for homebuyers. But it is important to be aware of the pros and cons before jumping into a variable rate loan.

Pros

Flexibility

The number one advantage of a variable rate mortgage is flexibility. With a variable rate mortgage, you don’t need to worry about penalties for things like increasing your monthly payment, or paying off your mortgage early. You also have the ability to make lump-sum payments on your mortgage throughout the year, which can be very helpful for home buyers with a fluctuating income affected by bonuses or commissions. If your life is likely to change relatively soon, and you plan on eventually moving or selling the house, …

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Buying a home vs. Renting: Which is better?

Buying your home is one of the biggest financial decisions of your life. However, it is a big commitment and there are a lot of hidden costs and factors that can make it unaffordable for some. Because of the costliness of buying a home outright, many buyers turn to renting instead, especially in expensive housing markets like London, New York, and Hong Kong. Determining which option is best for you depends on a variety of factors, and not everyone’s situation is alike. To help with this important decision, let’s take a look at some of the key differences between buying and renting.

Buying

When buying a house, it’s likely you’ll need to apply for a mortgage. To get a mortgage, you need a deposit (usually at least 10% of the home’s value) and a steady income in order to make repayments. The greater your deposit and income, the more your bank or lender will be able to offer you. However, if you live in an expensive area, or have a low salary and little savings, buying may not be for …

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Mortgage arrears in Ireland fall despite pandemic’s economic effects

Over the past year, the covid-19 pandemic has caused many economic challenges for Irish citizens and people worldwide. Between level 5 lockdowns, business closures, and soaring levels of unemployment, it would be logical to believe that people may be falling behind on payments, especially mortgages, which are most people’s largest and most important monthly payment. However, recent data shows that the number of mortgages in arrears actually  decreased during the first quarter of 2021, despite level 5 lockdowns and record high unemployment rates.

Recent data from the Central Bank shows that the number of family home loans in arrears decreased by 2,838 during the first three months of 2021. During this period, the Covid-adjusted unemployment rate hit its peak of 25.1 per cent in early January, as thousands of businesses were forced to close their doors due to level 5 lockdowns. This is surprising given that the number of people behind on their mortgage payments actually decreased, while conventional wisdom would expect to see an increase in arrears. This contrast suggests that government supports, such as pandemic unemployment benefits, have …

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Why are Mortgage Interest Rates so High in Ireland?

Recent reports from the Central Bank of Ireland indicate that mortgage holders in Ireland are still paying much higher interest rates as compared to most of their  neighbors in Europe. Therefore, why are people in Ireland paying high mortgage rates and is there a way to reduce it? Currently the  interest rate for a first-time buyer is at 2.79 percent, which means that it is now the highest in all of the 19 countries in Europe together with Greece. Despite the fact that the interest rates have dropped by 0.11 percent as compared to last year, they are still way more than what is being charged in other places in Europe where the average rate is as little as 1.31 percent. 

In a report by the Banking and Payment Federation of Ireland (BPFI), the mortgage for a first-time-buyer in Ireland is approximately €225,000. Basically, this means that someone who borrows this amount with the hopes of repaying it in 30 years ends up paying an extra of €167 per month and over €2,000 annually as compared to other countries …

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4 Easy Ways to Improve your Financial Literacy

Financial literacy is one of the most important and underrated skills that anyone can have. Understanding basic financial concepts such as mortgages, inflation, and interest rates is critical for financial success. Once you unlock this knowledge, you will be better equipped to effectively manage, save, and invest money for you and your family. This knowledge, combined with other good financial habits, is the key to financial well being and freedom later on in life. While everyone has varying degrees of financial literacy, there is an overwhelming amount of resources available to expand your knowledge on financial topics.

 

Read Personal Finance Books

If you enjoy reading, there is no shortage of finance books that cover a broad variety of topics, from eliminating debt to saving for retirement. One book recommended by Forbes magazine that covers the latter is Rewirement: Rewiring The Way You Think About Retirement!, by Jaime Hopkins. This book tackles common misconceptions and bad habits that prevent people from having flexible and successful retirement plans. For a variety of books on many topics, check out Insider’s …

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Could harsher punishments for mortgages in arrears lead to lower rates?

Mortgages are notoriously expensive in Ireland, with rates twice those of the Eurozone average. How best to address this problem has been a hot-button issue in Ireland for some time. Now, some are putting forward a new solution: harsher punishments for borrowers with mortgages in arrears. One of Irish banks’ stated reasons for rates being so high is that failing to meet mortgage payments doesn’t have high enough consequences for borrowers. For example, home repossessions in Ireland aren’t very common, since the process is so complex and can take several years. As a result, loans are riskier investments for lenders in Ireland relative to other Eurozone countries. If this is indeed the reason for rates being high, it follows that tougher treatment of such borrowers would lead to lower rates for everyone else.

Regarding the number of borrowers this would affect, statistics from the Central Bank of Ireland show that 5.3% of all principle dwelling house (PDH) mortgage accounts were in arrears as of December 2020. This percentage includes a total of 38,785 accounts. However, it’s also worth noting …

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Covid-19’s impact on mortgages

The covid-19 pandemic has had a massive impact on all areas of the financial world, including banks, loans, and mortgages. Mortgage arrears, or payments failed to be made by their original specified due date, had been consistently falling every year since 2013. However, Fitch predicts that arrears of at least 90 days will constitute about 14-16% of Irish home loans this year, their highest rate since the financial crisis.

Additionally, the pandemic has led to widespread payment breaks for mortgages in Ireland. Payment breaks involve the deferring of repayment of a loan to a later date; they do not change, however, reduce the total amount to be paid. In March of last year, the major banks in Ireland agreed to industry-wide payment breaks for those facing financial hardship as a result of the pandemic. This was done out of consideration for borrowers’ situations and lenders’ own desire to avoid high default rates. Ultimately, by May 2020, one in nine owner-occupier mortgage payments was on such a break.

Though this measure was taken of the industry’s own volition, soon after, the …

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