Understanding why mortgage rates MUST rise.

We have been saying for some time that interest rates on mortgages must rise, you can look at supply and demand, or you can look at the types of products that have ceased to exist such as tracker mortgages (removing fixed margin loan products) and then there is the proliferation of variable LTV products which set the stage for the ability to manipulate margin on more loans. The question is ‘what all of this means’, and the purpose of this post is to explain how deposits, business lending and mortgages are all interconnected parts of the banking system and how margins are set based upon them.

Last week PTsb finally came out and said that they were considering an

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If you are in financial trouble, don’t be an idiot

A part of me feels bad about not having any pity for some of the people who recently had their homes repossessed. Note: I said some not ‘all’, the reality is that I agree with repossessions for people who bury their head in the sand. In many cases the person had made no payment in three or four years and avoided any contact from the lender.

How do you negotiate with a person who won’t even come to the table? Or worse yet, who refuses to acknowledge there is an issue to come to the table for! The IBF recently decided to start working with MABS on a new protocol for people in financial difficulty, we fully support such a move, and for people in mortgage arrears, or indeed any financial arrears we even wrote a guide for …

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Supply, Demand, & Prices of Irish Property – A talk by Ronan Lyons

Ronan Lyons gave a talk to CFA Ireland on the 9th of July on the topic ‘Supply, Demand, & Prices in Irish Property’.

Ronan is one of the most respected voices on the property commentary circuit in Ireland due to his careful analysis and long term association with the nations largest property website daft.ie (from which he gathers his datasets).

This video (click here to go and watch the full play-list) is required viewing for anybody with an interest in the Irish property market.

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Alan Blinder talks to Charlie Rose

I know on the last post with Charlie Rose I said ‘this is a must see’ but cancel that, this one is the must see of the day!

This is a conversation about the growing fiscal deficit with Alan Blinder, Professor of Economics at Princeton University and Director of Princeton’s Center for Economic Policy Studies, David Leonhardt of “The New York Times” and Alan J. Auerbach, Professor of Economics and Law, Director of the Burch Center for Tax Policy and Public Finance, University of California, Berkeley

Alan Blinder of Princeton is a brilliant economist with both academic and practitioner experience, I always find his views really interesting.

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The Regulator is good for business… In particular State owned business

In browsing the site itsyourmoney.ie today I noticed something interesting. First of all there is a section for ‘savings & deposit accounts’ then a separate one for ‘state savings schemes’ (note SSIA’s are long gone), but the ‘savings schemes‘ are all really just deposits! Check out their rates too! lol.

If you go to ‘compare costs and benefits’ on deposit accounts you get a list, but in with the banks who shows up? An Post, so they are either a ‘state plan’ or they are not? Indeed it seems both apply, they have their own section, and they are also in with the rest of the financial institutions.

If you go to compare products and click on a high street bank name, it takes you to a page where it shows the product details of whatever that bank has on offer, however, if you click on the name …

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European stimulus plans

The ECB meeting is due to meet this week on the 7th and a further 0.25% rate cut is expected which will bring European base rate lending to 1% which is the lowest it will go according to guidance given in the past by Jean Claude Trichet. For mortgage holders this will be a further advantage for those on tracker mortgages and for those who hold variable rates where the cut is passed on.

The question currently is whether or not there will be any stimulus packages mentioned or any idea on what to expect in the coming months, with very concise plans afoot in the US, UK, China, and elsewhere it is likely that the Eurozone will need to make some formal plan as well and move beyond the monetary options of only playing with interest rates.

The EU has a problem other currency zones don’t, that of political cohesion, the USA is all dollar denominated and all under one flag, the UK is the same, as is Japan, …

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The banking ‘Whitewash’

Meredith Whitney talks about the ‘banking whitewash’, saying that the recent gains in many banks (they have been beating expectations by and large in Q1) are not all down to ‘recovery’ but instead due to other factors.

She says that the factors that lead to these gains are not replicable and that the underlying assets are still deteriorating. This makes for some interesting observation because the great deleveraging of both companies and individuals is still in full swing so there is little reason to doubt the observations Meredith Whitney makes, rather it will be how these factors play into the real economy that concern me.

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The banking 'Whitewash'

Meredith Whitney talks about the ‘banking whitewash’, saying that the recent gains in many banks (they have been beating expectations by and large in Q1) are not all down to ‘recovery’ but instead due to other factors.

She says that the factors that lead to these gains are not replicable and that the underlying assets are still deteriorating. This makes for some interesting observation because the great deleveraging of both companies and individuals is still in full swing so there is little reason to doubt the observations Meredith Whitney makes, rather it will be how these factors play into the real economy that concern me.

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Daniel J. Mitchell discusses Taxes on MSNBC

Daniel J. Mitchell talks taxes on MSNBC, Daniel is from the Cato Institute which is a conservative/libertarian institute, the points raised however, are valid in some cases and opinion oriented in others, talking about ‘European Stagnation’ for instance ignores some of the ‘European benefits’ which our citizens enjoy such as (generally) a more inclusive healthcare system and social welfare system.

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The pincer of fixed rates while in negative equity

A recent article in the Independent stated that ‘fixed rate borrowers are taking all the pain’. The base rate has fallen from 4.25% to 1.25% with a further rate reduction expectation taking the EU to a base of 1%. What this means is that people who felt the drop off in base rates (tracker mortgage holders & most variable rate holders) are now better off to the tune of about €425 per month.

However, for those on fixed rates the story is the reverse of this, they have not felt any reduction in the amounts they are spending monthly while at the same time many have had to live on less due to wage cuts, levies, and job loss. The fees for ‘breaking’ a fixed rate are usually from 3 to 6 months of payments.

So what can you do? If you have the savings to pay for the move you can go that route, but if you have been …

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