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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KBC launch a ‘quick approval’ process

For a while we have seen competition starting to heat up a little in the mortgage market. Several moves recently have started to demonstrate this further, Bank of Ireland have their ‘pay you to borrow from us’ campaign, KBC had a ‘pay you to switch’ along with rates that beat everybody else.

Now they (KBC) have launched a quick approval process which aims to cut down the time it takes to get approved which at it’s worst was taking up to four weeks with some banks. This is only for an approval in principle, which isn’t worth much (not like a loan offer is) but it is the first step in the mortgage process in terms of getting meaningful feedback from a lender.

They have a first time buyer 1yr fixed rate of 3.5%, short term fixed rates are where banks tend to go to attract business as the first year costs are what many buyers are fixated on rightly or wrongly.

There is one bank rumoured to be considering a return to brokerage, another who shut operations considering re-opening …

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Online Mortgage, Dublin Ireland

We are fans of technology and that is why way back in 2007 we went for a fully transparent business model which would allow our clients to track their mortgage on our system which uses the same level of security as online banking.

The current method of an online [glossary id=’6898′ slug=’mortgage’ /] application has not developed in Ireland to the extent that it could have, in part due to a collapse of lending.

We envisage that in time it will all be done online and electronically which will be good for everybody, brokers in particular as currently we end up using vast amounts of paper to replication applications to different lenders. The indexing of documents so that they can be sent securely online from one database to another is the next step.

In terms of when that will happen? Probably not for a few years yet, the systems don’t exist in banks to accept documents like this yet, a [glossary id=’6802′ slug=’broker’ /] could change easily because they have smaller less mission critical systems to work with. By that …

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Mortgage approvals up, lending figures down.

According to the IBF mortgage approvals report the numbers for April are up significantly, the figures stated that mortgage approvals are up 22.8% in a month on month basis and that it is primarily for the purchase of a house. This comes shortly after showing that in the first quarter of the year that mortgage lending is down year on year.

The activity being focused on first home buyers and movers (all looking for non apartment stock in the main) has already been well flagged on this blog.

In year on year terms this April is also up 8.7% on April 2012. A total of 1,433 mortgages to a value of €240m were approved by lenders here during the month of April. The next big question is whether or not they draw down, we have been watching this happen for a while, un-requisitioned loan facilities are common.

Another thing happening is that we are already seeing that the idea of doubling credit this year is unlikely, despite claims from the banks. If 2012 was a wash out then …

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11 Mortgage tips

Being a first time buyer actively looking to purchase a home is often a daunting situation, often made worse by the unknown. While some people find it a painless process others have personal circumstances or lifestyle habits which stack the odds against them which they are not even aware of.

That is why we have made a list of eleven tips that first time buyer should be aware of prior to applying for a mortgage, because if you only find out about them after you make your application (and in particular if it results in a credit decline) then it could set you back months at least if not years.

1. Be in a permanent job finished probation and ideally working continuously for 2 years: This is a good rule of thumb, an ability to repay is the key consideration with lenders, and the way they determine this by seeing an income history that has a likelihood of continuing. A loan is only underwritten once, at origination, so the lender knows that taking a chance early on means taking a …

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New PTsb products

PTsb have just issued a new rates matrix and the prices are good, they have a standard SVR for all loan to value amounts (ie: 90%) of 3.99% and 3.69% for LTV’s below 70%, these then revert to 4.34% after the first year which is not the market leader but it is right up there in the same ball park.

This (to our thinking) confirms PTsb’s re-commitment to the market, they have said they will up lending to c. €450m from the €60-70 (that’s the mortgage portion, the officially reported 90m includes all credit) they advanced in 2012.

They have also re-deployed staff in their broker centre which was a one person business unit last year! The staffing numbers there will be 5-6 people for 2013 which means there will be ample access for the intermediary channel, obviously direct and branch will also be active, all said it seems likely they may reach their target of €450m new lending.

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Final Quarter lending of 2012

From various conversations it seems to be that there will be a spike in lending during the final quarter of 2012, it is being credited to TRS availability, and many are saying that has brought forward demand but I don’t know it that holds true or not other than for buyers who would have been active anyway.

The Department of Finance was unimpressed when I suggested in the recent past that some kind of tax break on property would still be required going forward, oddly enough that did actually happen, the new property tax will come with a waiver for first time buyers, although this will never add up to the same benefit as TRS would.

We’ll have to wait until 2013 for the precise IBF/PWC lending figures but suffice to say, if the anecdotal evidence I am hearing from every lender in the market is true, then Q4 may prove to be the biggest lending quarter in 2012. Certainly it would keep the trend that you have a big Q4 followed by a quieter Q1, so keep an eye …

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