Primetime: excessive interest rates

Last night’s Primetime had a well thought out piece on variable interest rates.

The general thesis was that variable rates are ‘too high’ and that banks should not be allowed to charge them, the figure of 1% of a ‘cost of funds’ was mentioned several times and various suggestions were made as to making the banks stop the practice of setting their own prices.

To begin with, the ‘cost of funds’ at 1% may be what a bank buys their raw materials at, but then you have to make more on top of it to allow for operational costs, to provide for losses, regulatory burdens, margin and the like. It is worth noting that in AIB’s interim statement which was only made yesterday that they noted that “Net Interest Margin (NIM), excluding ELG, expanded to c.1.64% year to date (YTD) September 2014”.

This means the idea of 4.5% minus the 1% ‘cost’ equating to a 3.5% ‘profit’ doesn’t stack up. If it did the net interest margin …

Read More →

Today FM: The Last Word on mortgages

Matt Cooper from ‘The Last Word’ had Charlie Weston (Irish Independent) on his show along with Karl Deeter to discuss mortgages, loan rates and some of the developments that are starting to happen in the marketplace.

Some of the main points of interest were that switching is available again, rates are likely to lower and that some lenders are coming out with longer term fixed rates.

Read More →

Banks may have the upper hand in the tracker debate

In the Irish Times Barry O’Halloran covered a story on trackers which looks at a case by Alan Grant of DNG against PTsb who have claimed they have the right to seek full repayments on mortgages and not just interest only.

Our readings of loan offers are that there is an agreed period which is subject to reviews. PTsb have been seeking repayments on investment loans since 2010. The idea that it shouldn’t be allowed under the Consumer Credit Act 1995 is probably going to prove contentious because when you buy an investment property you are not acting as a consumer meaning the provisions may well not apply.

You can be a consumer for a financial service even if you are a credit union or a company with a turnover below €3,000,000 but for the head of mortgages in one of the countries largest estate agents there is a dual issue at hand, firstly Mr. Grant should be expert enough in mortgages to carry out the role as a mortgage advisor (bearing in …

Read More →

PTsb Overpayment form & is it good value?

There has been some coverage of people saying that the PTsb offer of a discount for overpayment is not good value, that the bonus should instead be in the region of 25%.

I don’t know where that figure has been taken from, having tried to work it out several times we just can’t make it stack up.

The form that you need in order to opt for this over payment is here.

Is the idea of an overpayment any good?

In the PTsb scheme you have to consider ‘net interest’ rather than just stating that it isn’t a great idea. The figures I have done are based on the clients position rather than what the bank may or may not make – in the same way that I don’t query the margin a shopkeeper gets on a Mars bar – which is where some focus has been on this.

Rules of scheme: you can’t pay more than 50% of your mortgage, every 5k gets a …

Read More →

Are investment property owners ‘hard pressed’?

PTsb are going to take away investors tracker mortgages unless they go to capital and interest payments, that story was broken by Charlie Weston in the Independent today. That is a business decision by them, but for the business affected (landlords) it creates a new problem.

How can they do this? Isn’t it part of the new rules that banks can’t take your tracker from you? Yes and no, if you bought a property as an investment you are not covered by the Consumer Credit Act 1995 (you are not acting as a consumer) or the Code of Conduct for Mortgage Arrears. So any renegotiation can result in the loss of a tracker, staying on interest only (if you are with Ptsb – and others will follow suit) will require moving to a variable rate.

We’ll look at a standard example: Take Joe, he is married and earns €45,000 p.a. and his wife Kate makes €30,000 they bought an investment property with their SSIA’s (€30k deposit on a property for €300,000 in 2006). …

Read More →

Why bid for EBS?

Along with many others, I was confused at the fascination with EBS as a takeover target. You see, EBS’s best year recorded a profit of less than €50 million. Which given the size of its operation and loan book is rather unimpressive. The company is also heavily staffed by union members meaning it would be difficult for present management to wade in and cut the numbers in a meaningful manner.

So what is the obsession with private equity and EBS? And what about PTsb?

For a start, PTsb are not currently my lead favourite as a bidder, there are two reasons, one is that the bank rescue plans are being looked at from a competition aspect in Europe, and if PTsb were to take over EBS it would reduce competitive forces, secondly, PTsb may not be in condition to do a takeover. They have their stress-test due out in September and for now we have no idea of how that will look, EBS would add a large chunk to their loan book but deposits in the society are only c. …

Read More →

Mortgage Question: I have no savings, can I borrow a deposit?

The majority of lenders now insist that your deposit comes from a non borrowed source, and will decline your application if you plan to borrow it. The lenders who will consider your application will assess your application with the new deposit loan as a financial commitment which decreases the amount you can borrow on the mortgage, and because it is a short term loan it will eat into borrowing capacity much more than you may expect.

[eg: €100,000 loan over 30yrs costs c. €420 before tax relief, but one tenth of that, €10,000 at personal loan rates over 3yrs will cost c.€313 per month which would reduce the amount you can borrow by approximately €80,000!]

Short answer: You should aim to have your own equity in the deal via savings, if you borrow a deposit then you are running an additional risk and our firm are of the belief that this is generally not in the best interest of the borrower.

Read More →

‘Are we there yet?’…. when will the bottom of the housing market be reached?

The most popular question I am asked as of late is whether or not we are at the bottom of the housing market, and the answer is ‘no…. but perhaps closer than we think’. Today we will consider a few of the things we will need to see in order for ‘recovery’ to occur.

First of all we need to see a reduction in the massive overhang of housing stock, even if the number reduces, they all need to be sold and a degree of scarcity will need to develop in order to make prices go up again, currently supply is swamping demand and that dynamic will leave uncertainty in its wake.

However (and here is part of the ‘perhaps closer’ bit), NAMA will likely take a lot of housing off the market, in particular it will take it off the market and drip feed it back in, if this happens then it will avoid devastating fire sales, it might also lead to stagnation …

Read More →

Living in the past, Irish property prices.

Paul O’Connor of MyHat.ie and PropertyWeek.ie has written up a great post on the Irish property market, the single biggest hindrance in the Irish property market is that of it being totally non-transparent when it comes to sales prices, most of us would settle for some opacity but alas, even that is too much to ask for.

Here is Paul’s Take on it:

An auction is a sale conducted in public. As such, prices paid at auction have always been available to the general public, and until auctions themselves became a victim of the market crash, we had become used to seeing auction results reported every week in the property pages of the newspapers.

In contrast, a private treaty sale is conducted in private. It does not specifically imply price secrecy, just that you can negotiate a deal at your own pace …

Read More →
  1. Pages:
  2. 1
  3. 2
← Older Entries