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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Types of mortgages and lending rules

Irish law has specialized sets of lending rules depending on the type of mortgage application. Types of applications are split into three different categories: first-time buyers, remortgaging or switching, and buy-to-let buyers. Depending on which of these categories an application falls under, different loan-to-value (LTV) and loan-to-income (LTI) limits will be used. The former refers to the minimum deposit a borrower must have on a home before getting a mortgage loan. The latter refers to the maximum amount of money borrowers can receive in relation to their yearly gross income; while this is normally capped at 3.5 times one’s income, lenders can provide additional allowances of varying amount depending on the type of application.

Firstly, there are first-time buyers. These applicants are those buying a house for the first time, so the deposit required by LTV limits is understandably less steep. They will need to have a minimum deposit of 10% of the home’s total value. For example, if the price of a home is listed as €250,000, a 10% deposit would amount to €25,000. Lenders are allowed to have …

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The fastest way to get a mortgage

What is the fastest way to get a mortgage in Ireland today? To those unfamiliar and/or engaging with the process for the first time, it can seem drawn out and overly complicated. However, it doesn’t have to be that way. While different people will likely want to use different approaches, but there are some general rules that everyone can follow to ensure their application goes as smoothly as possible.

The first thing one should do is make sure their financial situation is otherwise well and accounted for. In addition to employment and income, this can include things like home insurance and valuation of the property. One should also consider how long they’ve lived in Ireland; depending on the lender, this may be important in their consideration of an application. Borrowers should furthermore ensure that they have good credit and are not too heavily in debt. Lenders are likely to be more apprehensive regarding borrowers with unstable financial backgrounds, as they seem less likely to be able to ultimately repay their loans.

The next things one should keep in mind are …

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What you need when applying for a mortgage

Before applying for a mortgage, one should be sure they have all the necessary documentation. Typically, if one goes through a broker or chooses to go directly to a lender/bank, guidance will be provided on all the necessary paperwork and how to complete it. However, it can save applicants valuable time to try and get pre-approved by either lenders or brokers. In this case, they would likely need to take some initiative.

Documents required for approval and preapproval can vary depending upon the borrower and lender.

All borrowers will likely need:

Proof of ID Proof of Address Personal Public Service Number Proof of Income Financial Statements

Proof of identity can include things like a valid Irish driver’s license or passport. For proof of address, one might consider a utility bill, a tenancy or lease agreement, or government-issued documents that include said address.

Personal Public Service Numbers (PPSN) are issued by the Department of Social Protection (DSP). Non-residents can obtain a PPSN by applying for one with the DSP. Such an applicant will also need to provide proof of …

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Banks or brokers? Which to choose when applying for a mortgage

In applying for a mortgage, there is always the question of whether to go directly to a bank or to go through a broker. There could be advantages and drawbacks to either approach; the former could be faster and/or less expensive, but brokers can provide valuable assistance before and during the application process that make them a viable alternative. Ultimately, which of the two is the better option is based on the individual, and they should consider personal knowledge, experience, and preference when applying.

Firstly, going straight to a bank allows one to avoid paying a broker’s fee. Additionally, there may be an added level of trust associated with conducting negotiations directly. Assuming one has a high credit score, healthy income, and otherwise checks all of the boxes banks are looking for, it could prove to be faster than going through a broker. However, failing to do so might lead to one’s application being rejected out of hand. If an applicant is aware of such complicating factors, they should consider going to a broker instead.

If an applicant isn’t aware …

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The Gender Gap is still Prevalent

The Bank Of Ireland has recently reported that there has been a slight decrease in the gap between the pay received by their male and female employees. However, the bank is still working to reach a 50:50 balance for its workers.  Currently, the bank of Ireland is reporting a gender pay gap of 23.8% across all their departs, which is a 0.4% improvement from the last year. The bank has stated that a large proportion of this comes from the under-payment of their female employees at senior levels and junior grades.

The system that the Bank of Ireland uses to calculate the pay-gap difference is by working out the average pay of all women in the company and comparing then to the average pay of all the men in the company. The Bank of Ireland is currently introducing more flexible ways of working with all employees, as well as pulling career development and leadership programs for their female employees.

It was reported last year that nearly 41% of all senior appointments in 2020 were female, which is an improvement from …

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Money Questions for Couples

Things are going great with you and your significant other. You have been dating each other for a while and things seem to be going great, but until you start asking about their financial history. Being asked or asking about someone’s financial history can always be daunting. Many young couples spend hundreds of hours planning their fabulous wedding but forget to prepare for their financial mergers. People treat money as a scary monster, so we tend to avoid bringing it into the conversation.

Almost one-third of couples say finances cause the most stress in their relationship. Couples who fight about money once a week are 30% more likely to be divorced than those who fight about money a few times a month. This can all be avoided in the beginning by having an honest and open conversation about their finances before getting married. Here are some questions to ask to start the conversation.

What do you earn, owe, and owe?

It may be hard to open up about this question, but the lack of money is better than the lack …

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Is combining Finance the right thing to do?

Finally! Today is the day, your significant other is moving in with you!  A dream that finally came true and you both are dancing happily. But then, the first rent bill comes, and you are stuck. How should I handle or now how do WE handle it? Back in the day, typically couples were married and combined all aspects of their lives together. All was now family property. Times have changed, couples are moving in together before marriage without any legal binding and it leaves them wondering, how do we handle our finances? Should you and your significant other consolidate your finances or maintain your own finances independently?

How many couples have their finances shared, separated, or some of both? Millennials that live together are more likely to keep their finances separated than any other group. There are many advantages to keeping them separate. One may be in a situation where they hold debt. With debt in their shadows, it is easy to understand why they may feel guilty to burden the other with their problems. Or you may have …

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Zero cost changes can help your financial journey become better

Living a healthy financial life does not always mean spending as little money that it brings the joy out of life but bringing enjoyment in ways to spend or save money. Of course, investing in good furniture rather than the cheap table that the paint chips is a much better choice. But there are also plenty of other ways to upgrade your life by changing things out for no extra costs.

Using your existing memberships to access free and complementary goods.

Did you look closely at the membership you paid for? Chances you did not. Many of our memberships give us access to free shows or movies like Amazon Prime or free access to airport lounges. There is a lot of value we are paying into our memberships already. Like magazines or books, they can be expensive to subscribe to each month or purchase individually. At the library, they already hold many of these subscriptions and publications which we can check out for no costs. For instance, some libraries provided a handful of museum memberships the public can check out …

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