Bank of Ireland’s Marketing Gimmick

Recently, the Bank of Ireland has been accused of a marketing gimmick. The Bank of Ireland has launched a new mortgage product that does not offer cash back. The bank has maintained a high market share. Bank of Ireland has been offering up to 3% in cash back of the value of the mortgage taken out. However, the Bank does not have the lowest rates in the market.

Cash back can be defined as money back from a mortgage. For example, if an individual borrows €200,000 he or she may get back €6,000. The first 2% of cash back is paid at the time the mortgage is taken out. The other 1% is paid at the end of year five.

However, the bank has now introduced a High Value Mortgage Interest Rate with no cash back. The new mortgage product is the first fixed rate product without cash back that the Bank of Ireland has one since the introduction of cash back in 2014.

The High Value Mortgage Interest Rate only applies to people borrowing more than €400,000. The product is also …

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Is a ten year fixed rate a good idea?

Recently KBC introduced a 10 year fixed rate, they are not the first back to have done this, in the past other banks had them but their prices were high, the difference today is that you can get a 10 year fixed rate mortgage for below 3% and that means it’s worth considering.

First of all, why would you want to fix for so long? Obviously the longevity of a guaranteed price in a world where rates are expected to rise over time makes it attractive. This has to be balanced against the likelihood of competitive forces driving down Irish mortgage rates. Currently there is upside down pricing where fixed rates are cheaper than variable rates, how long this will last is anybody’s guess.

What we can do is look at the yield curve in order to get an idea of when rates might go up. Looking at that curve today (the quote date is from the 22nd which is last Friday) we see that yields are still negative a full six years into the future.  What …

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Independent Newspaper mentions Irish Mortgage Brokers

In an article today about mortgages by John Cradden of the Irish Independent we were quoted extensively regarding our thoughts on loans, extracts are below:

Last month saw the official launch of a new mortgage lender here in the form of Australian firm Pepper, who will be lending to the self-employed and those who got into arrears during the downturn but are now back on track.

“Up to now, if you had credit issues you were virtually unbankable, that is set to change,” said Karl Deeter of Irish Mortgage Brokers. “Equally, as banks add bells and whistles to their product suite, you’ll see some will be about flexibility rather than price and that’s a sign of competition in product differentiation coming through.”

He adds that rates will improve with the new competition. “This was what happened in the last credit cycle and will happen again so time will take care of that, but Ireland also has unusually high risk associated with our loans so that has to be factored in.”

The cashback offers are another popular incentive, with …

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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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Mortgage rates falling and set to head even lower

We were never advocates or in agreement with the ‘make government force mortgage rates down’ campaign (albeit on very friendly terms with the campaign promoters). The reason was that rates needed to come down in a natural way or banks would curtail credit or charge more elsewhere, this was a balancing act between sorting out operational costs and back book issues.

The belief we had, and one that does seem to be bearing fruit, was a slower (ie: less popular) road to lower rates, brought about by competition.

This has been happening, it doesn’t make headlines because it’s a slower burn but the trend is under way and it goes like this: more competition equals lower rates, the higher rates spur competition as it attracts new entrants and in time, when matched with a low yield curve, rates will fall.

The introduction of Pepper into the market, along with general competition has meant that the rate reduction cycle has begun. The hallmarks are that firstly, rates are high after a financial crash, that always happens, those high rates bring in …

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Fixed rate comparison Ireland

When it comes to fixed mortgage rates in Ireland there is a little confusion, the first being about ‘whether to fix or not’ and secondly, if by doing so will you lose out should Irish lenders choose to lower their mortgage rates.

The simple answer is that if you fix your mortgage you may win or lose depending on what rates do, but that is missing the point of why you fix to begin with. It provides you with certainty of payments and often there is a premium due because of this, in simple terms, you pay a bit more for the ‘fixed’ assurance.

Below is a list of some of the best fixed rates in Ireland as well as who offers them.

Best 3yr fixed rate: 3.6% offered by PTsb and Bank of Ireland

(note: you can get better again by going with KBC and opening an account which gets you 3.55%)

Best 5yr fixed rate: 3.8% offered by Ulsterbank, BOI and Haven/AIB

These are ‘tiered variable rates’ meanining you have to have a low loan to value or …

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Newstalk: Pat Kenny Show on variable rates

We were asked to speak with Pat Kenny today about variable rates and the government plan to intervene to make banks drop them. This was, after considering various pieces of evidence shown to be a deeply political rather than pragmatic move. We also demonstrated that there are documents which the Minister for Finance had drafted up with the banks specifically stating that he would not intervene on matters of pricing, the recent round of ‘meetings’ is in direct contravention of that.

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Drop rates so banks can lend more…

In the ongoing variable rates pricing fracas there are many points being overlooked. The first is why our mortgage rates are higher than other European countries, but we should just ignore that – at least to stay popular.

We’ll say that the government/Central Bank pressure works and banks drop their rates, what next?

We might get around to the greater number of people under price pressure for housing (the renters), but that’s unlikely, instead we’ll inadvertently drive up house prices a little more by making credit more easily available.

Because the lower the variable rate the lower the stress test. Lower rates equals more credit, it’s a fact of life in lending.

You heard it here first. The lower variable rates go the more it frees up a persons lending capability. We have covered the way the Central Bank lending rules won’t work to the point of being annoying (and we weren’t alone, the ESRI and …

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Mortgage rates set to drop and competition to increase in 2015

We have commented several times since last year that the trend for mortgage rates in 2015 will be to see them drop. With spreads of c. 300bp’s on lending it makes it one of the reliably profitable sectors of banking given the stringent underwriting being applied.

With the Central Bank looking to curtail first time buyers but doing nothing about incumbent borrowers getting restricted it means that they have directed the market towards refinancing.

This is because one of the niches left on the table is that of existing variable rate holders, which banks will now try to tempt away from one another in an effort to grow market share.

There are many who cannot take part and below is a list of the mortgage holders who won’t benefit.

Those in negative equity, they are going to be stuck when it comes to refinance, they can trade up with a negative equity mortgage but they won’t be able to ‘switch’. Those on fixed rates which accounts for in the region of 50,000 mortgage accounts, they face break penalties, and only …

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KBC launch a ‘quick approval’ process

For a while we have seen competition starting to heat up a little in the mortgage market. Several moves recently have started to demonstrate this further, Bank of Ireland have their ‘pay you to borrow from us’ campaign, KBC had a ‘pay you to switch’ along with rates that beat everybody else.

Now they (KBC) have launched a quick approval process which aims to cut down the time it takes to get approved which at it’s worst was taking up to four weeks with some banks. This is only for an approval in principle, which isn’t worth much (not like a loan offer is) but it is the first step in the mortgage process in terms of getting meaningful feedback from a lender.

They have a first time buyer 1yr fixed rate of 3.5%, short term fixed rates are where banks tend to go to attract business as the first year costs are what many buyers are fixated on rightly or wrongly.

There is one bank rumoured to be considering a return to brokerage, another who shut operations considering re-opening …

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