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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Dublin property prices 2012-2013

This post is a guest blog by a person who doesn’t want to be named.

The two year period between January 2012 and December 2013 was a remarkable period in the movement of the prices of houses and apartments in Dublin. The period started in January 2012 with house prices dropping by -21.7% from a year earlier while apartments dropped slightly less at -18.4% and yet by the end of the period.

In December 2013 house prices were rising by 15.3% annually with apartments rising further to 20.8% annually. Another feature of this period was the manner in which the prices moved, with house prices steadily slowing down their annual decline all through 2012 and from January 2013 to December 2013 having continuous positive increases in annual prices.

However apartment prices showed a lot more volatility over the period entering positive territory in February 2013 when compared to a year earlier but dipping back into negative figures for the next three months with the result that it was June before apartment prices showed increases on the same month a year …

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Primetime: excessive interest rates

Last night’s Primetime had a well thought out piece on variable interest rates.

The general thesis was that variable rates are ‘too high’ and that banks should not be allowed to charge them, the figure of 1% of a ‘cost of funds’ was mentioned several times and various suggestions were made as to making the banks stop the practice of setting their own prices.

To begin with, the ‘cost of funds’ at 1% may be what a bank buys their raw materials at, but then you have to make more on top of it to allow for operational costs, to provide for losses, regulatory burdens, margin and the like. It is worth noting that in AIB’s interim statement which was only made yesterday that they noted that “Net Interest Margin (NIM), excluding ELG, expanded to c.1.64% year to date (YTD) September 2014”.

This means the idea of 4.5% minus the 1% ‘cost’ equating to a 3.5% ‘profit’ doesn’t stack up. If it did the net interest margin …

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Moncrieff Show: news review on economic matters 25th August 2014

The Moncrieff Show on Newstalk had us on to talk about interest rates, economics and taxation. In the unmistakable style that Sean Moncrieff is known for, suffice to say, he kept Karl on his toes!

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Best mortgage rates September 2012

Mortgage rates are constantly under review and even though we might be expecting an ECB rate cut this week to 0.5% (which will be a historic low) it is highly likely that rates will sit still or even rise. The conundrum for consumers is about the rate choice, banks have just upped rates prior to any rate cut and by doing this then not passing on a rate cut they actually increase their margin significantly.

The best mortgage rates at present are below:

<50% LTV: AIB 3.34% >80% LTV: AIB 3.79% 1yr fixed: AIB 4.15% 2yr fixed: BOI 4.49% 5yr fixed: PTsb 3.7%*

*The PTsb 5 year fixed rate is a good example of a pricing discrepancy that is related to the PTsb loan book, this rate is excellent, lower than the standard AIB variable and fixed for 5 years! The reason for this is that by lending on this type of property PTsb will increase their assets (to fix the loan to deposit ratio that is too high) quicker and in return they will give up some margin.

If …

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AIB Rate hike: where is it now and where is it going?

AIB have announced an increase in their Standard Variable Rates (SVR’s) as well as in their Loan to Value Standard Variables (LTV-SVR’s: which are tiered variables based upon your loan to value), effective from August 10th. Caroline Madden of the Irish Times and Charlie Weston from the Independent both carried the story today, this comes only days after Allied Irish Bank announced that they lost over €2,000,000,000 in the first half of 2010.

Their SVR now stands at 3.25% but where is it headed? For that it is important to look at several different factors, firstly, their cost to income ratio has gone from 48% in 2009 to 63% for 2010. That means that it is costing them €63 to turn over €100 in income, this is a 32% increase on last year in costs which is a bad indication.

There are a multitude of factors playing into this:

1. Guarantee/ELG costs:

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