Pepper Group may be bought out

A financial services company from Australia has received €436 million offer to takeover from KKR, a New York private equity firm.

 

It is not KKR’s first time entering the Irish market. Pairing up with the Ireland Strategic Investment Fund they set up a €500 million fund to finance the residential property development.

 

KKR bought Avoca Capital back in 2014, a credit investment manager in Europe located in Dublin, that was managing €7.05 billion of assets at the time.

 

Now they are looking at taking over the Pepper Group. Pepper entered the Irish financial services market about 5 years ago by buying GE’s Capital’s Irish mortgages.

Pepper has spread throughout Ireland ever since they bought around €600 million of subprime mortgages during the height of the financial crisis. Buying them at 40c on the euro which was backed by Goldman Sachs, a Wall Street …

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Mortgage Market Update

The Financial Broker gives readers an overview on currently property prices and mortgage market conditions.

The Central Statistics Office published a report showing price inflation on property had increased 10.7% in the past year up to February. A similar report reveal how the number of newly build housing last year was 14,932 units when estimates denote a demand of up to 50,000 units. These numbers illustrate a problem in the current mortgage market, which this article pinpoints the causes of. The author laments about rising property prices, arguing that many potential home buyers have missed out on the prime time to purchase property, and are currently no long capable of affording the housing of their choice at an acceptable price.

The author attributes the current housing price and rent inflation in Ireland as consequences of a lack of supply in urban areas instead of lax macro-prudential regulations. In fact, she argues that current Central Bank regulations are too restrictive, and thus have prevented demanders from being able to locate and buy affordable housing. While the prudential regulations have lowered the …

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Mortgage Market Trend Outlook 2012

We have made a few more bold predictions in our ‘Mortgage Market Trend Outlook 2012’ and reviewed how wrong many of our 2011 forecasts were as well.

Some of the main points thus far are:

1. That mortgage lending bottomed out in 2011. 2. That IBRC may take on some tracker loan portfolios to de-risk state owned banks (as the state already owns these loans entirely anyway). 3. That rates for existing AIB borrowers will have to go up but that for new borrowers rates may come down with changes to how prices are charged depending on risk of the proposed loan. 4. That deposit rates will start to drop. 5. That up to 25,000 mortgages will be deemed ‘unsustainable’ and that the ‘won’t pay’ contingent of arrears cases may be as high as 1 in 5.

We hope you enjoy this report, we in turn hope that we get some of the calls right!

Many thanks,

Irish Mortgage Brokers

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Mortgage Market Trend Outlook 2011

It’s a new year and we have a new set of predictions for the Irish mortgage market in 2011. In our report (get it here or click on the image) we go through them in detail (bullet points below) and we also review our forecast for 2010 to see just how inaccurate we were on the calls we made for last year.

In our report this year the main areas are:

1.Banks will push up interest rates by another 100bps or 1% (independent of any move by the ECB) costing the average borrower (loan of €200k over 25yrs) an additional €1,280 p.a. Rate hikes may start as early as this month. 2. Variable interest rates will generally start to rest at or north of 5% by 2012. The state controlled banks in particular will be forced to make some painful decisions on interest rates they charge to customers. 3. Fixed rates may be temporarily removed from the market, offered on a limited basis or priced out …

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Behavioral Economics & Arrears – avoid repossession by reward

I had an interesting conversation with Frank Pallotta of Loan Value Group in New Jersey earlier today. Loan Value Group is an organisation that was set up to help avoid foreclosures, they use the expertise of behavioural economists from Wharton, mortgage finance experts, mortgage advisers, and consumer marketing experts, to work with lenders at risk of strategic default and likely default.

There are really only two classifications of borrowers in difficulty, those who can’t pay and those who won’t pay – Loan Value Group can both identify and work with either cohort.

We share a common view on principle reduction, Loan Value Group’s opinion is that ‘blind principle reduction’ is very negative, it addresses the consumers balance sheet, but from a working point of view for every other stakeholder its a mess. And if people are willing to lie for a 0.5 to 1% – reduction in rate then imagine the incentive if there was 10k or more in principle reduction? Therefore, we need solutions that don’t disadvantage the …

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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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A different idea for bailing out the property sector.

There is a bailout coming, we saw the makings of it for a long time, first there was the talk of the central bank about the underlying strength of Irish financial institutions, the constant lobbying for something to be done for the property & construction sector, then articles stating blatantly that a bailout would occur if there were problems. Now we have read that the government are going to make plans to help first time buyers because mortgage funding is not as readily available as it used to be.

Let us start on the right foot, first time buyers never had it easy to begin with (I actually did an article on this exact topic before – click here). They were either being hit with stamp duty, the need for deposits or other issues. Now the Government are looking to bail out people who haven’t even bought property yet and that is an error.

There are a few …

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No Bailouts, no free lunches

If you were to describe the world of finance or investment as a ‘jungle’ then it would be a fair comparison to say that the first rule of the jungle, the core principle of it, and that which must remain as a central tenet is this: Investors who take a risk should always lose if that risk doesn’t pay off, equally they should always reap the reward if it does.

Seems simple right? Wrong, we are seeing the build up for a bail out in the press on a near constant basis, the majority of which is pointing towards the construction sector or the financial sector. This is all totally wrong, and it goes against any right thinking concept of capitalism or free markets.

Banks in particular don’t like regulation and press constantly for free market principles, so they of all …

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The good thing about a Property Bubble

There is so much gloom and doom in the press recently that only those with the greatest fortitude seem to find any cause for happiness. Personally I have been talked down off the roof a few times already (philosophically not in reality). And hardly a day passes where the Government don’t give us some negative outlook news. If you are into sadomasochism there is a new way to get your kicks, it’s called the ISEQ and if you are truly sick you can always watch property prices.

However, today’s article is going to focus on the good life and the good things that are coming out of the property bubble and that will continue to serve us all better in the future (catastrophic losses aside)

1. The Bubble performed where the Government and Good Intentions failed: The Government and all of the good intentions in the world were never able to gentrify the north inner city (my former home), but the property bubble did a GREAT job! Walking down Sean McDermott Street or Gardiner Street after dark is no longer …

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Your loss my Grain.

I have spoken in length about agflation in 2008 and as much as I’d love to to consign the whole topic to history, however much like a few choice people I know, it simply won’t go away, even though it would be great if it did.

Most of the coverage in the press is focusing on biofuels and the fact that they are using up human consumables to make car consumables, however this is really only a partial answer, what is likely the true driving force is the emergence of Western style diets amongst the BRIC nations (Brazil, Russia, India, China) and other emerging economies. The breakdown is simple, staple foods and their availability are under attack from biofuels but its animals and the increased consumption of them that are causing the most serious shortfall.

I’m not about to go all pro-vegetarian/vegan/macrobiotic or anything on people but there is a strong argument for a reduction in meat consumption apart from the obvious health risks that a meat heavy diet brings with it. The issue in the here and now is …

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