RTE 9 O’Clock News with Martina Fitzgerald, 22nd April 2010

Martina Fitzgerald of RTE 9 O’Clock news did a piece on the Government backed lender Home Choice Loan, critiquing the fact that they have only advanced 5 mortgages since their inception in autumn of 2008. Home Choice Loan was set up to alleviate the absence of lending in the Irish mortgage market but it has failed to do this which is evident in the numbers.

We believe that Home Choice Loan does have a very relevant and meaningful role in the mortgage market, but not in the guise of being another lender competing with the rest of the high street, rather in facilitating people in negative equity or arrears.

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AIB Interest Rate Hike: How much? To Who? What’ll it cost?

Yesterday AIB increased interest rates for both existing and new borrowers. This comes as a huge blow to consumers, in particular given that the consumer is the same taxpayer who has done so much to bail out the bank. Do people have the right to be angry? Hell yeah they do!

The move has been coming for quite some time, we have been harping on about this for over a year, the most recent prediction was to put a time-frame and figure on the hikes, stating that it would start in Q1 of 2010 and in the course of the year we’d see c. 100 basis points or 1% of an increase across the board with a further 50 basis points or 0.5% in 2011. Today’s Independent has stated that we can actually expect all of it in 2010.

Why is this happening?

Simply put, the banks are not charging enough to cover the costs of loans that are not performing. In a way you …

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Irish banks, caught in the perfect funding storm

Irish banks are caught in a perfect storm of funding costs versus lending costs which spells bad value for consumers. This is clearly seen on the deposit and lending fronts, our banks can’t offer headline rates on deposits, nor can they charge sufficiently on lending. This is creating a multi-billion Euro dilemma which will ultimately be paid for by an already unfairly burdened taxpayer.

On the deposit side foreign banks can afford to pay far more than Irish institutions meaning they can hoover up deposits rapidly and with relative ease, on the lending side, Irish banks are unable to obtain the margin they need in order to compete and remain profitable.

When it comes to leading rates for indigenous lenders you will see that Anglo, despite being nationalised and having the inherent backing of the state on all deposits, is paying the highest rates for an Irish institution on  6 month (it is the best of the Irish institutions) and 1yr deposits (it is the best across the board on 1yr deposits) – this is well above the odds they …

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Just who is getting the mortgages?

Caroline Madden wrote an article in today’s Irish Times ‘Just who is getting the mortgages?‘. It is a question that begs answers, at first it seemed to me like asking ‘Who is John Galt?’ (Rand readers will understand). The stories we hear constantly is that banks are hoarding credit, they will not extend credit to particular groups and when they do the underwriting is so strict that even credit-worthy applications are being turned down.

This article features our feelings on the matter, we believe that some of the banking statistics being thrown around make fore ‘good copy’ (good PR) and very little else, as we are not seeing applications turn from approvals in principle into closed loans, and in many cases, approvals are coming in far below what the applicant is actually looking for.

One element of this is natural, after a credit fuelled boom you …

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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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AIB closing to switchers: Why? And what does it mean?

AIB announced today that they will be closed to switcher mortgage business effective immediately. We spoke to Mary Wilson from RTE’s Drivetime on the topic and we stated similar views to what you will read here.

The options open to a bank with limited liquidity are essentially ‘who do we lend to’, in terms of expanding credit or extending credit to where it may have a meaningful economic impact. Sadly (because I have to be honest, as a broker this really sucks for us) that means cutting out certain parts of the market such as switchers.

The rationale is that switchers already have the money, they are merely shopping around for a better price, first time buyers on the other hand, haven’t even gotten the money to buy a home with yet and if you have to choose between the two I think it is fair to say that AIB made the right decision. Their commitment to the state during their recapitalisation was to first time buyers, not refinancing applicants or …

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Mortgage options down 50% as of 2010

The Examiner carried a story about the number of options available to borrowers in the present market and the fact that they have dropped over 50% since 2008.

In 2008 there were 380 different mortgages available on the market across all banks and all rate suites, today, that number rests at 179 meaning that at least 50% of the choice is gone. That is also reflective of the fact that so many lenders have exited the market. Below is a list of several who are no longer lending here.

Halifax Fresh Mortgages Springboard Stepstone Nua Homeloans First Active GE Money Leeds

Many of these providers were in the non-prime/specialist/sub-prime category, however, a drop of 50% in choice doesn’t mean that there are no options left. Certainly tracker mortgages are a thing of the past as are Standard Variables (referring to new business for these products, existing clients will keep their existing product).

The other factor that makes this less spectacular is that many lenders replicate offerings, so when each lender pulled out, their two year fixed …

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