Why make out that a phone call is a felony?

I’m normally a fan of Stephen Donnelly’s but have to wonder if there is some bias in his article this week.

In looking at this from a compliance perspective (because the allegation is really that regulations are being broken by the bank) we will consider three key pieces of legislation

The consumer credit act 1995 The consumer protection code 2012 The code of conduct on mortgage arrears 2009-2011

All of which are statutory codes with full enforcement powers built into them.

It starts with this paragraph ‘IF your bank phoned you up to four times a day, would you feel harassed? Imagine, as your mortgage arrears mounted, that you had maintained contact with your bank, as you’re meant to do, but they kept calling’.

The person was apparently being harassed, called ‘early morning and late evening’ – which I assume is an a way of alluding to wrongdoing but not actually stating whether section 46 of the Consumer Credit Act was being broken or section 8.14 of the Consumer Protection Code.

We also can’t look …

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AIB tightening criteria? Are banks really lending?

In recent days the IBF came out with a very positive story about how mortgage lending has increased year on year for the first time since 2006, at the same time the Central Bank are saying that criteria is tightening and other research suggests that almost HALF of our residential market is transacted in cash!

This is a classic example of two stories that contradict each other, or at least that seem to do so. Can you have tightening criteria with more lending? Of course you can! Demand for mortgages is up year on year (in our brokerage taking gross leads as the figure) about 30% or more.

Banks are saying that they accept the vast majority of mortgage applications (c.62% is their estimate), and the likes of AIB are actually ahead of …

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Mortgage interest relief set to end, but is it worth it?

Mortgage interest relief ‘tax relief at source’ or just ‘trs’ is a credit available to first time buyers who purchase their first home prior to the end of 2012. Currently it is due to be discontinued from 2013.

At the moment it is applied as follows:  up to a maximum of €10,000 interest per buyer can be applied so you take your total interest paid for the year and add it up.

Say you buy for 200,000 with a 10% deposit and an interest rate of 4.5% the cost per year is €1000pm over 25yrs. The interest portion is as follows:

(200,000 * .9 [90% mortgage) * 4.5% = 180,000 * 4.5% = approximately €8,100 a year will be treated for TRS reasons which is 25% for the first two years reducing to 22.5% for the next three years and 20% after that.

The 8,100 gets 25% relief = €2,025 or about €169 a month. In the example above when you get this credit it will mean that your ‘cost’ is €1,000 – €169 or €831 per month.

Because the …

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The trend in lending and deposits

We have been banging on for quite some time about the trend in mortgage and deposit rates, namely that mortgage rates will continue to rise and that deposit rates will start to drop (already happening) and this will continue downwards – in particular you’ll have to watch for zero rated fund movements.

Zero rated funds are the money that banks keep for you (a liability for them) in the likes of demand and current accounts. You used to get zero interest but in return you got free banking. Now more lenders are demanding that you keep a certain balance in the account or you get charged a fee, such as Bank of Ireland’s recent decision to require a €3,000 balance to qualify for free banking.

This creates a near ‘negative interest rate’ for people who don’t keep that sum in their current account because fees mean the bank will cover all operational cost associated with your account for regular banking activity while making money elsewhere with those funds or …

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Bank rates, onwards and upwards…

Something that is interesting is how people are amazed that banks are jacking up interest rates at a time like this… In fact, it is precisely because of the time we are in that they are doing it, and due to the market environment they face.

Banks have a choice at any time as to where they will put the money they hold, their job is to turn liabilities (deposits, debt, equity finance) into assets and at present there is a golden window of opportunity where any decent (almost any) assets can be lodged with the ECB and the ensuing liquidity recycled.

For the most part this has helped to support the bond market, part of the LTRO was based on this premise, but in Ireland while bond yields are attractive (still above 5%) mortgage rates are not as attractive. Currently the standard variable is less than 5% meaning a person can borrow for cheaper than the nation they live in is able to!

That won’t last, the likelihood is that sovereign rates …

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IBF Latest Lending figures – what does a ratio tell us?

Yesterday good news was spreading about a year on year increase in new mortgages for home-owners, I debated the topic on TodayFM with Pat Farrell from the IBF. Figures are tricky to do on radio so I figured I might write something today, but got a surprise before the chance came when I saw the Irish Times article on the topic.

It isn’t like the Irish Times to get it wrong (personally, I take whatever the write as a virtual equivalent to gospel), but they did, today’s article states that we saw the first rise in mortgage loan numbers (we didn’t), and

The number of new mortgage loans issued during the second quarter rose on a year-on-year basis, the first time this has happened since early 2006.” (this would imply that lending grew or was larger YoY, it wasn’t).

The IBF/PwC Mortgage Market Profile reveals that a total of 3,225 new mortgages to …

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Every little helps (except when it means mortgages)

Tesco won’t be offering mortgages in Ireland despite rolling out a full host of financial services, this is also a departure from the UK proposition in which they are included, something we covered nearly four years ago.

Bothered? Maybe not, but you should be because any market with a functional duopoly is unhealthy, we saw for instance how AIB increased their rates and for 2 or 3 hours their prices were the same as BOI, but then BOI co-incidentally increased their rates by 25 basis points on the same day so the pricing difference occurred once again.

Why would Tesco decide not to enter the Irish market? They claim it’s regulation, one doesn’t need a Professional Diploma in Compliance to realise that much of our regulation is identical to the UK and in foundation is primarily based upon it, …

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Talking through my hat

In Saturday’s Independent Laura Noonan covered mortgage arrears (it wasn’t Charlie Weston – one commenter mentioned him and we had to delete it for obvious reasons). I’ll refer back to the table below a few times in the blog

OFFICIAL figures on the “mortgage crisis” overstate the number of households in real trouble – and lack key insights into how deep the problem really is.

An investigation by the Irish Independent has revealed the Central Bank’s figures include several types of borrowers who are no longer in trouble.

A large number of senior bankers right across the industry who spoke to the Irish Independent now insist the situation is improving.

The latest statistics, however, indicate that 77,630 households are at least three months behind on payments.

But these figures include: – Those who missed payments long ago and have since resumed paying normally.

Why don’t the banks make this information public then? And when the say ‘repaying normally’ …

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