An opportunity for home owners amidst rising house prices

The average house price in Ireland has risen 11.2% over the past year, and prices in at least 8 counties are currently rising faster than that immediately preceding the market crash. Rapidly rising prices, low interest rates, and insufficient supply are together representative of the current situation in Ireland’s property market. Although this situation has many market watchers worried about possible inflation, and is definitely a hindrance to buyers still seeking for a home at an affordable price, there is a perk that could result for homeowners with an existing mortgage.

 

This blog post will illustrate this hidden opportunity and give homeowners the necessary knowledge if they intend to pursue it.

 

For homeowners with a high standard variable or fixed rate mortgage, your interest rate is most often based directly on your Loan-to-Value  ratio (LTV). The loan to value ratio is ratio of your loan to the value of your property. Each lending institution may have a different way of calculating and determining your interest rate but in general, the higher your LTV, the higher your interest rate. …

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Loan to Value ratio – a video which explains what you need to know about it

The ‘loan to value’ ratio is a key concept in mortgage lending, it is also extremely simple which makes the concept very easy to understand and calculate. What is a little more complex is ‘why’ it matters and what the view of a lender is when it come to the risk associated with the loan to value. This video is just over a minute long and explains what you need to know.

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RTE Primetime spoke to Irish Mortgage Brokers about lending caps

Robert Shortt from RTE’s Primetime show spoke to us about the Central Bank idea of putting caps on lending in terms of the loan to value and the loan to income ratios. There is a sense in this, but we don’t believe such a crude instrument is nuanced enough to negate the downsides that such a policy brings with it. There are better ways to do this and they should be explored.

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KBC to move to lower LTV’s for ‘rural’ or ‘non-urban’ homes

KBC Have just announced that they are going to pull back on the loan to value (the amount they will finance on a mortgage) for ‘non urban’ properties, effectively all properties that are not in cities and towns. They have gone as far as defining this.

They are also not taking chances on higher end properties. We are of the opinion that non-apartment second hand homes are almost ‘the only’ market that is active and that at the higher end of the market the fallout will continue, this ties in with the KBC view – they are expressing that very concern by dropping LTV’s on loans over €400,000.

So the new situation is:

Home Purchaser – First Time Buyer or Mover Maximum LTV for loans up to €400K or  less

* Up to 90% for urban areas* * Up to 80% for all other areas

Maximum LTV for loans over €400K

* Up to 80%

* “Urban” locations defined as towns/cities with population of >15,000 and population centres within Meath, Kildare, Wicklow with population of > 3,000 (all at Lender’s …

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Postcodes: a prelude to property tax

I think that the introduction of postcodes will usher in the foundation for property tax, and that the gains to be had from postal efficiency are not at the heart of the move toward a comprehensive postcode system.

Just to give the background to this post, the Sunday Tribune reported:

Residents in Dublin’s coveted D4 addresses have only two years left until their exclusive postcode is renamed by the Department of Communications, as plans for the new postcode system are finalised by Minister Eamon Ryan. The department plans to issue tenders for the system by Easter, but a delay has meant the code will not be in place until the end of 2011, and not early next year as planned.

Under the new coding system, areas such as Dublin 4 and Dublin 6 will be renamed under a new six-digit system, such as D04123 and D06123. However Labour’s spokeswoman for Communications, Energy and Natural Re­sources, Liz McManus, said the latest estimates for the new system …

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When one blunt instrument fails use another

Banks are restricting credit, in a market economy rationing is generally a mistake, but at the same time they can’t come out and say ‘we are restricting who we will lend to’ particularly when the taxpayer is playing such a fundamental role to their survival.

How are banks achieving this? Thus far they have used several tools to do this…

1. Interest rates: This is often referred to as a ‘blunt tool’, and when a lender wants to pull back from the market they look at what the best prices are and ensure that in almost every case they are far more expensive than the other players in the market at that time. It would be like a shop owner wanting to slow the sale of chocolate bars, if they were to charge significantly more than the shop next door then their stock would move much slower than the other persons. This has two effects – it makes their money available for lending last longer, and when it is lent out …

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