The Morning Show: Distressed property auction

We were featured on TV3’s ‘The Morning Show with Sybil & Martin’ in a piece they did on the recent Allsops auction. Angela Keegan of MyHome.ie and Karl Deeter of our own company took part.

The general view we have is that if you mark down prices enough then people are willing to buy what they see as value, that means that either prices remain too high or sentiment is such that appetite is not there at the current price level (we suspect the former weighs heavier than the latter!).

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PTsb Overpayment form & is it good value?

There has been some coverage of people saying that the PTsb offer of a discount for overpayment is not good value, that the bonus should instead be in the region of 25%.

I don’t know where that figure has been taken from, having tried to work it out several times we just can’t make it stack up.

The form that you need in order to opt for this over payment is here.

Is the idea of an overpayment any good?

In the PTsb scheme you have to consider ‘net interest’ rather than just stating that it isn’t a great idea. The figures I have done are based on the clients position rather than what the bank may or may not make – in the same way that I don’t query the margin a shopkeeper gets on a Mars bar – which is where some focus has been on this.

Rules of scheme: you can’t pay more than 50% of your mortgage, every 5k gets a …

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Nyberg report shows that Brokers had nothing to do with the crash

On page 21 of the report ([footnote 27]- available on BankingInquiry.gov.ie) the following appears:

Mortgage intermediaries began to emerge as a force in the residential mortgage market in the mid-1990’s, initially as a distribution channel for non-branch based mortgage lenders. Due in part to alliances with estate agents they exercised significant control over the “first time buyer” market in particular. This market was viewed by lenders as an attractive market segment and key for customer acquisition and exit financing for development lending.

At the peak of the market in 2005 mortgage intermediaries accounted for about 45% of new residential mortgage loans. Against this background, intermediaries were able to leverage their relationships with lenders pushing for better mortgage terms (and sometimes larger loans). This led to a considerable reduction in bank margins (interest and commission). Many banks sought to compensate by increasing loan volumes to maintain earnings. While these changes impacted on the mortgage market, mortgage intermediaries had only a limited and indirect impact on the banking problems which are the subject of this …

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Sunday Business Post: More haste less speed in the mortgage crisis

Angela Keegan of MyHome.ie wrote an opinion piece in the Sunday Business Post yesterday which included some of our firms commentary:

Figures compiled by Karl Deeter at Irish Mortgage Brokers showed that the size of the average first-time buyer mortgage peaked in the first quarter of 2008, at €251,000.

At the moment, the average drawdown is €188,000. According to Deeter, the ‘average mortgage’ from 2008 on a 2.1 per cent tracker costs €1,076 per month. Current TRS is €80 per month, so the net cost is €996.With the new, bigger TRS in the Programme for Government, the TRS will now be €119, resulting in a monthly payment of €957, an extra saving of €39 per month.

Compare that to the new first-time buyers, who will miss out on TRS. If they take out a loan for €188,000 at 4.3 per cent variable, their cost per month is €1,023.With rates likely to push up over 5 per cent, irrespective of the ECB, Deeter believes that, by this time next year, the divergence between the two mortgages could be as much as …

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The reason why mortgage rates don’t have to go as high as bond rates.

Dr. Peter Bacon made an interesting quote stating that he thought that

“The first is I think households are going to be more cautious about spending than is assumed in some forecasts. The second is I think the interest rate consequence of international certainty is going to be a deterrent to investment taking place.”

Earlier, Dr Bacon told the audience that Irish firms borrowing money would ultimately end up paying interest rates that were linked to the cost of Irish government borrowings.

“You can call it yourself as to where the risk premium on government bonds is going to go — where it goes there goes general interest rates for companies in Ireland. In the long term, the cost of finance will be 200 or 300 basis points above the cost of government borrowings.”

The difference between government borrowing and bank borrowing is that people don’t lodge money with the state at zero interest. We do pay taxes, and buy low interest state products via the post office, but on the whole, there …

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Sunday Time: OpEd on Mutual Building Societies

The Sunday Times ‘Money’ section ran an opinion piece by Irish Mortgage Brokers on Mutual Building Societies in which we lamented the end of an era but made the point that the benefits of mutuality no longer exist given the market we are in.

Mutual building societies have an interesting history but their purpose was ultimately financial intermediation which is what banks nowadays perform, that, along with pricing and the test of the market have shown that Mutuals no longer have a place in the market on the basis of their structure, rather the market requires firms that exist on the basis of competition just like anybody else.

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AIB Rate hike: where is it now and where is it going?

AIB have announced an increase in their Standard Variable Rates (SVR’s) as well as in their Loan to Value Standard Variables (LTV-SVR’s: which are tiered variables based upon your loan to value), effective from August 10th. Caroline Madden of the Irish Times and Charlie Weston from the Independent both carried the story today, this comes only days after Allied Irish Bank announced that they lost over €2,000,000,000 in the first half of 2010.

Their SVR now stands at 3.25% but where is it headed? For that it is important to look at several different factors, firstly, their cost to income ratio has gone from 48% in 2009 to 63% for 2010. That means that it is costing them €63 to turn over €100 in income, this is a 32% increase on last year in costs which is a bad indication.

There are a multitude of factors playing into this:

1. Guarantee/ELG costs:

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