Everybody pays, even the innocent

There were many innocent parties to the credit fuelled property bubble, they are generally those who didn’t borrow, or who carried no debt, choosing instead to live frugally, and if they used debt they used it wisely. Many of these people are at the polar ends of the age spectrum, very young (who don’t even have access to credit) or much older (who have paid off their mortgages), something we will all need to get used to though is the fact that everybody is going to pay for the mess left behind, this goes farther than NAMA.

The process I am describing is already under way, the very payments system (our financial infrastructure), is going to be used to generate economic rent from the people of Ireland in order to bring in more profit to banks so that they can repair their balance sheets. This price will be paid by the taxpayer outside of the bailout money already being supplied on our behalf. This will be even paid by people who manage to …

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How much of a deposit do I need?

When making a mortgage application this is a question that many first time buyers want to know, how much money do I must I have for a deposit? Well, that kind of depends on which bank provides the mortgage finance!

Lending criteria is different for every bank/building society/lender, this goes for rates, the general underwriting criteria as well as the ‘loan to value‘, the deposit you need is 100% minus the Maximum LTV and that will give you the deposit amount you require. For instance, ICS have a maximum LTV of 92% so the deposit you need – if you are obtaining finance through them – is 100% – 92% = 8%.

What is interesting in that example is that when you go ‘sale agreed’ on a property the estate agent will ask for a security deposit and the balance of 10% at the signing of contracts, this is an example …

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Supply, Demand, & Prices of Irish Property – A talk by Ronan Lyons

Ronan Lyons gave a talk to CFA Ireland on the 9th of July on the topic ‘Supply, Demand, & Prices in Irish Property’.

Ronan is one of the most respected voices on the property commentary circuit in Ireland due to his careful analysis and long term association with the nations largest property website daft.ie (from which he gathers his datasets).

This video (click here to go and watch the full play-list) is required viewing for anybody with an interest in the Irish property market.

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The lower rates go, the worse it gets (for some)

There are winners and losers in every rate cut, so literally somebody, somewhere loses out every time, this can be the bank, a borrower or a saver. To a degree Jean Claude Trichet uses the euphemism ‘rate cut’ in place of the more accurate ghetto expression ‘bitch I’ll cut you!’, but ultimately there are those who get hurt.

Who exactly? Well, people on fixed rates who may want to break them are made worse off, people who are saving generally are made worse off too. And banks themselves are also hit on their margins when rates drop.

How does a lower rate affect these three situations?

Breaking a fixed rate: If you are on a fixed rate and want to break it then there is a breakage fee, this is one of the times under the Consumer Credit Act 1995 where a bank can hit you with fees for early redemption or changing to another rate, the examples we are seeing are all c. €20,000 so it’s serious …

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Derek Braun vs David Cantwell on the Late Late show

Pat Kenny had two well known commentators on the Late Late show on Friday, David Cantwell a director with the largest new homes estate agent Hooke & MacDonald and Derek Braun author of ‘Irelands House Party’. The section on the show had some interesting debate and both sides had some valid points, some things however were not mentioned – for instance – Braun pointed out that huge profits were made on a certain south side development (and nobody doubts that) but there was no mention of the taxation that is paid via contributions to local councils, VAT, other taxation, paying bubble wages etc.

Cantwell spoke about property prices being at their bottom (granted this is only in his opinion) when considering the supply and other economic factors they clearly cannot be, as well as failing to mention some of the common sense home truths which Braun used to shoot down his arguments.

The only issue I have is that of all the developers I know only one isn’t going into liquidation, in a

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Best deposit rates in the Irish market April 2009

Here is a list of the deposit products in Ireland with the highest interest rates at present.

Demand account: Anglo premium demand 4.75% 7 day notice: Anglo 2% 21 day notice: PTsb 21 day saver 4% 1 month: Investec 3.25% 75 days: PTsb 3.6% 6 month: Investec 4.25% 1 year: Anglo 4.9% 18 month: EBS 6%

If you want to consider your deposit options you can contact us on 01 6790990, although we don’t have deposit agencies with every lender listed in the top position, so in some cases we’ll have to send you direct but in any case we can still help you choose the best deal on the market. All rates are up to date as of 20th of April 09′ and are subject to change.

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The ‘Crunch’ is nearly over, but what lies in its wake?

The Euribor 3 month money is at 2.822% which means the margin on interbank money is now at 0.322% (the current base rate is 2.5%) over the base. The Credit Crunch by definition is a sudden reduction in the general availability of loans (or credit) or a sudden tightening of the conditions required to obtain a loan from the banks. One of the biggest hallmarks of the whole financial crisis was the disjointed relationship of the Euribor from the ECB.

Traditionally the Euribor (we are talking about the 3 month money generally) trailed the ECB at c. 0.1 to 0.2%, so if the ECB base rate was 4% then the Euribor was (approximately) 4.13% or something like that. In July of 2007 this all changed and margins on interbank lending shot through the roof, to such an extent that literally thousands of loans in Ireland alone turned into negative …

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The 'Crunch' is nearly over, but what lies in its wake?

The Euribor 3 month money is at 2.822% which means the margin on interbank money is now at 0.322% (the current base rate is 2.5%) over the base. The Credit Crunch by definition is a sudden reduction in the general availability of loans (or credit) or a sudden tightening of the conditions required to obtain a loan from the banks. One of the biggest hallmarks of the whole financial crisis was the disjointed relationship of the Euribor from the ECB.

Traditionally the Euribor (we are talking about the 3 month money generally) trailed the ECB at c. 0.1 to 0.2%, so if the ECB base rate was 4% then the Euribor was (approximately) 4.13% or something like that. In July of 2007 this all changed and margins on interbank lending shot through the roof, to such an extent that literally thousands of loans in Ireland alone turned into negative …

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What stimulus is there after a 0% rate?

There are generally two strands to monetary stimulus, firstly there are interest rates, and then there is the actual money supply. We’ll talk about both of them here and what will mean for consumers.

Interest rate drops drive money into an economy in a few different ways, obvious to most is that the cost of borrowing comes down, so if a company has to borrow to hire people they can do so, people need less to service debts which increases their disposable income and that puts more money into circulation. The other thing that happens is that bank deposits look less attractive, interest rates dropping actually cause rate compression, something we discussed here before, and that means money (especially at a 0% interest rate) will not sit on deposit and will instead move to corporate bonds which will thus be a way of extending credit to companies and they can finance projects.

In the past many would ‘fly to quality’ …

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How falling interest rates hurt banks during a liquidity crisis

The falling interest rates are heralded by consumers of Irish mortgage companies as a godsend – well, for the clients of the Irish banks who actually pass on the full rate cuts that is! However, at the same time it creates a rate compression which damages the bank and this is what we will consider in this article.

Banks have two sides to the operation roughly speaking, on one side there is the lending function which we are all aware of, mortgages, car loans, personal loans etc. on the other side is the deposit taking function which provides part of the money they lend out. There is of course the interbank market which supplements (and often surpasses) deposit funds for lending, but to keep things simple we will focus on a world where deposits roughly equal lending.

When

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