We have been working for quite some time on creating an online mortgage process. The first time we did this was about 12 years ago but that was too far ahead of its time and the banks basically laughed at us. That has changed and now in 2019 we hope to make the proposition of an online mortgage process a reality, we’ll make it possible for people to do most of the process over their phone in an easy to use mobile environment. Stay tuned and we’ll let you know when this choice becomes available!
One of the things that we constantly fall back on in mortgage brokering is the cost per thousand (usually written as ‘cpt’ or ‘cost per 000’) sheet. It gives you the actual cost of borrowing €1,000 at a certain interest rate over a certain period.
Banks tend to send out rate sheets which are particular to their specific products, but we also have our own cheat-sheets which cover most of the prices you’ll find (or at least ball park enough to make the difference meaningless).
If you click on the image to the left you’ll get a pdf of our Cost Per 000′ sheet. The way you figure out how much a mortgage might cost you is as follows:
Divide the mortgage amount by 1,000 (to get 1/1000th) and then multiply by the cost you find from going across the rate column and down the term column.
For instance: you want to see how much it will cost per month to borrow €317,000 over 30yrs at 4.25% then its 317×4.92 = …
Sometimes I ask the folks in the office about the questions they are asked by clients they are dealing with at the time, often it will result in comments like ‘the usual’… ‘How much can I borrow? What’s the best rate etc.’ and while that is true, another question often asked is one that is implied but not directly a question.
‘What do banks want from me when I am making a mortgage application?’
The answer, in the sense of principles, is that that they are looking for a way of determining your ability to repay a debt, some mathematics is used, some gut instinct often plays a part too, qualitative is mixed with quantitative.
Banks use different general mortgage calculators and these use your financial information to give different brackets of lending outcomes. In looking at your p60 they try to establish a year on year figure for your earnings, if you got a raise in the interim (if you did recently you are a rarity!) then …
There are winners and losers in every rate cut, so literally somebody, somewhere loses out every time, this can be the bank, a borrower or a saver. To a degree Jean Claude Trichet uses the euphemism ‘rate cut’ in place of the more accurate ghetto expression ‘bitch I’ll cut you!’, but ultimately there are those who get hurt.
Who exactly? Well, people on fixed rates who may want to break them are made worse off, people who are saving generally are made worse off too. And banks themselves are also hit on their margins when rates drop.
How does a lower rate affect these three situations?
Breaking a fixed rate: If you are on a fixed rate and want to break it then there is a breakage fee, this is one of the times under the Consumer Credit Act 1995 where a bank can hit you with fees for early redemption or changing to another rate, the examples we are seeing are all c. €20,000 so it’s serious …
The falling interest rates are heralded by consumers of Irish mortgage companies as a godsend – well, for the clients of the Irish banks who actually pass on the full rate cuts that is! However, at the same time it creates a rate compression which damages the bank and this is what we will consider in this article.
Banks have two sides to the operation roughly speaking, on one side there is the lending function which we are all aware of, mortgages, car loans, personal loans etc. on the other side is the deposit taking function which provides part of the money they lend out. There is of course the interbank market which supplements (and often surpasses) deposit funds for lending, but to keep things simple we will focus on a world where deposits roughly equal lending.
I heard countless anecdotes about online mortgages over the past few years and to be fair I felt that people were fundamentally right about things, that the mortgage market would go to the web to a large degree the way so many other things have.
Dunnes Stores strongest growth area is Internet shopping and I think Tesco would likely say its a big growth area as well, no need for retail space, people can browse as they see fit etc. so surely the same thing would happen across countless sectors? Right? Even finance?
Wrong… Well, not fully right anyways. If you look for an online-mortgage the likelihood is that you will be asked to fill in some information and ultimately a human being will still contact you and you will then send in documentation to them etc. it won’t be ‘online’ in the sense that buying a plane ticket is ‘online’ (i.e.: zero requirement for human interaction/intervention), however in this article I will outline the possibility for mortgages online and how I think the successful players will approach it.
Firstly …
