Who has the best mortgage rates?

The ‘best rate’ is a misnomer because interpretation of what is the ‘best’ is a subjective question, for a very conservative person a 10 year fixed rate is ‘the best’ and from that point the ‘best’ will likely be whatever is the cheapest ten year fixed rate, having said that, after careful consideration the best 10 year fixed rate mortgage might be one that allows you to pay off a lump sum during the fixed period without any penalty thereby ensuring that you can eat into your capital quicker, is a feature like that worth extra money each month if it isn’t the cheapest? To some people it may be, to others it isn’t.

If you are considering a property purchase and are not a cash buyer then you will need financing, and this comes at a ‘price’, the interpretation of that price is generally the rate, so which rate is better (we’ll assume you want a 1 year fixed rate), 2.5% or 2.6%? Naturally you’d be inclined to say it is …

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How a bank might undo your tracker mortgage

‘I have a tracker mortgage so I don’t care’ a man recently said to me when I was talking about the near definite increase in margins that we will start to see in mortgages as lenders seek margin and reprice risk.

It was almost said in a smug manner, a kind of ‘yeah, times are hard but I have my tracker mortgage’, and then it struck me, most banks have a get out clause, they don’t have to use it, but they might. So I thought it might be interesting to point out exactly how this could come about, and essentially the relationship it has with falling property values, so if your lender ever calls you out of the blue asking you to let a valuer into your gaff be sure to say ‘no’.

The way that trackers could be wholesale removed from borrowers is via an up to date valuation where the tracker rate is connected to the loan to value (LTV) of the property, many tracker mortgages only …

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What is the mortgage market like lately?

People ask me ‘how is business’ a lot, is it macabre fascination or do they want to hear something reassuring? I don’t know, but my general answer is ‘can we talk about something happy?!’. There are so many intermediaries that have shut down that on many levels (I feel I speak for the entire firm on this) we feel privileged to still be operating through the downturn. While we all know that there is a crisis, and we are reminded of it every day, I think it is worth considering the changes that have occurred in the mortgage market in the last year,with an emphasis on 2009.

Mortgage debt is decreasing: Our total ‘indebtedness’ on the mortgage market is coming down, we are deleveraging as a society. This is happening as people start to shun debt and fear the forward commitments of borrowing, in the same way that companies and funds have been deleveraging, everyday people are doing the same. In the past, recessions generally had a large debt element to …

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‘Fix or forever hold your tongue!’, A floor on Rates (with a rise likely!)

Rates likely to rise as per AIB’s statement, and PTsbs actions, what we are trying to tell everybody, in clear English is this: ‘If you don’t have a price guarantee on your mortgage via a tracker or fixed rate agreement then you will be paying greater margin over ECB in the near future than you are now’. If you don’t act upon that information then it is your own decision but you can’t say you weren’t forewarned.

Forewarning doesn’t stop disaster, the historical evidence on that is overwhelming, in particular in the military arena, today however, we will look at some of the potential changes we might see in the market.

Floor Rate: This would be a variable agreement whereby the rate will never dip below a certain level. For instance, a bank might say that in a low rate environment it will (in the future) never allow its variable rate to drop below 4%, …

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What do banks want when you apply for a mortgage?

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 …

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Apply for a mortgage, one buyers story

Today’s post is brought to you buy Keith Sheeran, it is a clients story on the mortgage process, sometimes in industry we spend so much time on one side of the table that we forget what it is like to be on the other, this post is a good reminder (for brokers) of what it is like for our clients when they deal with us…. I was a little dubious about applying for a mortgage, but my father has just retired and he said that he would give me some money as a deposit to help buy a house.

When I heard this I must admit that I was delighted. I was half tempted to go to the nearest VW garage and buy that convertible I have always wanted. However, sense prevailed, and I was quickly reminded by my Dad that the money was for a deposit only. Whilst everyone is giving out about the property market, I understand there is really good value out there and I would be getting …

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The Criteria Crunch

We have just been informed that one the lenders we deal with are only getting through applications received by the 4th of March, that is a near 20 day delay on new applications they are considering. Why the backlog? Has the market suddenly recovered? Are they being flooded?

No, rather it is a case that in banks nearly everybody has been enlisted to work in ‘collections’ and the staff were taken from every other department, in particular the ‘new business’ section. The bank we are talking about today merged their direct channel with brokerage so even going via a branch makes no difference, the whole company has only four working underwriters.

So inasmuch as the credit explosion saw too many resources being thrown at lending and the expansion of same, the crunch is doing the exact opposite by overshooting the mark in the reduction of resources. For a publicly quoted bank to be 20 days behind means that the market is facing yet another hurdle in reaching its rational level. Lending hasn’t frozen, people are …

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Valuations in property are currently meaningless

Free markets, or indeed markets in general, have a tendency to set prices, not through control, not by one person holding up a placard and shouting from the rooftops, but rather through the process of prices reaching a point at where they occur, where demand and supply are reacting with each other.

So if you look for €3 million for a three bed semi in Donnycarney your property will not sell, no matter how much you want it to. At the same time, if you were to list a property there for €50,000 it would sell overnight, and both of these extremes demonstrate a pricing being totally out of balance with the market. The interesting point now though is this: The market itself doesn’t know what is happening, so valuations are currently meaningless. By that I mean the people who go out and value property are not able to make accurate assumptions about property prices in this market, we are seeing this daily, and then dealing with the end result which is …

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