Making sense of ‘help to buy’

Yesterday Revenue announced the details of the new ‘help to buy’ scheme. It is designed to make buying a home more realistic for first time buyers and to increase the supply of new homes. Whether it’s a good or bad idea is beside the point, what most people want to know is how it works so here’s the breakdown.

It’s a scheme to allow first time buyers buying a new home to get a rebate of up to 5% of the purchase price or contract price (whichever is the lower) from income tax and DIRT tax paid in the past four tax years to a maximum of €20,000. The property must cost less than €500,000 or 600k for retrospective applications, the size of the loan versus the value of the property must also be 70% or more.

So, for every €100,000 of value you must be borrowing at least €70,000 the idea being that very cash rich buyers don’t need this help. It started on the 19th of July 2016 and goes until the 31 Dec 2019.

Now that it’s …

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Central Bank rule changes discussed on Today FM’s ‘The Last Word’

We were part of a panel discussion with Matt Cooper on the ‘The Last Word’ the day the Central Bank rule changes were announced.

The panel consisted of Charlie Weston from the Irish Independent, Brendan Burgess from AskAboutMoney.com and Karl Deeter of Irish Mortgage Brokers.

There were differing views where the for/against was clearly laid out and the concerns about whether it’s a good idea.

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RTE News at 6 features Irish Mortgage Brokers

We were asked for a comment on the Central Bank switching report by RTE News at 6. We believe it is telling us what many already intuitively know, that by being assertive and moving away from lenders who charge more that people will ultimately save money.

There is a counterbalancing argument about the savings being estimated over the life of the loan, but equally, the report doesn’t factor in switching contributions which could sway it back in favour of moving from expensive providers to lower cost lenders.

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Drivetime RTE: Mary Wilson speaks to us about mortgage rates, 22nd May 2015

We spoke with Mary Wilson of Drivetime on RTE about mortgage rates and what the implications were of the changes Michael Noonan (Irish Minister of Finance) announced that day. We also read through the Central Bank report on the subject and considered the findings of their analysis in terms of the impact it might have on borrowers.

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What is happening with fixed rates?

We have been asked a few times about fixed mortgage rates and why they are lower than standard variable rates at the moment.

This has been going on for a few months in the mortgage market and the reason is fairly simple, lending rates are going to drop over time.

The one year fixed rate has traditionally been one that is used to attract business to a bank or building society. They are often a loss leading rate and after availing of it the person goes onto a higher rate or another fixed rate so we have to strip them out.

But from the 2yr rate onwards you normally paid a premium over and above the standard variable rate. So what is happening?

Lower fixed rates mean that banks are going to capture a margin that is likely to decline in the near future. The Euro yield curve is below.

What you see is that it is negative (below zero) for many years into the future, in fact, it’s only hitting …

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RTE Drivetime: Talking money on ‘Kidults’ with Karl Deeter & Jill Kerby

This week on RTE Drivetime’s ‘Talking Money’ segment we looked at the issue some parents have with ‘Kidults’ who are grown up children living at home. There are many reasons behind the increased occurrence of people remaining at home, and there are both advantages and disadvantages, we tried our best to give some tips that might help!

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Mortgage rates set to drop and competition to increase in 2015

We have commented several times since last year that the trend for mortgage rates in 2015 will be to see them drop. With spreads of c. 300bp’s on lending it makes it one of the reliably profitable sectors of banking given the stringent underwriting being applied.

With the Central Bank looking to curtail first time buyers but doing nothing about incumbent borrowers getting restricted it means that they have directed the market towards refinancing.

This is because one of the niches left on the table is that of existing variable rate holders, which banks will now try to tempt away from one another in an effort to grow market share.

There are many who cannot take part and below is a list of the mortgage holders who won’t benefit.

Those in negative equity, they are going to be stuck when it comes to refinance, they can trade up with a negative equity mortgage but they won’t be able to ‘switch’. Those on fixed rates which accounts for in the region of 50,000 mortgage accounts, they face break penalties, and only …

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