Mortgage cuts are nearing

The anticipation of cuts in mortgage rates has been increased. Ulster Bank recently stunned the mortgage market with the first cut in its variable rate in more than a year. This recent decrease in its variable rates will increase savings for first time buyers. According to the Independent the typical first time buyer will be saving around €50 a month.

Tracker and fixed mortgage rates are also supposed to fall. There are increasing expectations that the European Central Bank (ECB) will also cut key rates. Cutting key rates will allow banks to reprice their mortgage books. Mortgage rates are being cut in response to weak growth within the Eurozone and inflation declining.

As of yesterday, the European Commission lowered its forecast for growth again. The lowering of growth forecasts contributes to greater pressure on the ECB to cut interest rates it charges banks.

Ulster bank is dropping one of its key variable rates by .4%. The new key variable rate is defined as 3.9% for those whose loan is less than 90% of the properties value. This has a huge impact …

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Vulture funds and Ulster Bank

Ulster Bank has recently created a portfolio of €900 million of problem mortgages for sale. This portfolio includes an immense number in which borrowers had short term forbearance deals with Ulster Bank. Forbearance is a special agreement formed with a lender and borrower to delay a foreclosure. This occurs when mortgage borrowers are unable to repay according to terms and lender may choose to foreclose the property or asset.

Many of the affected borrowers for loan sales were engaged with the bank to secure least short term debt deals. However, Ulster Bank has claims that past customers who engages with the bank to make repayments of loans even on loans in the past are far less likely to see their loan sold to a vulture fund.

Vulture funds are generally private equity firms or a form of financing that is provided by firms to invest in properties that are performing poorly. These poor performance properties are likely to be undervalued and thus the vulture funds take advantage of the underestimated properties.

Private home mortgages on average in the current sale have …

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Will Ulster Bank Dominate the Housing Market

Recently, Ulster Bank, a major mortgage lending bank, announced a drastic interest rate cut down to a 2.3% fixed rate for two years. Essentially blowing their competitors out of the water.

Against all other players in the market, the Ulster Bank is offering the lowest rate of all.

Ulster’s closest competitors, being the center at Haven Mortgages with a fixed rate set at 2.8%. All other banks showing rates setting at 3% – 3.2%.

The lingering question after this announcement by Ulster is, will we be seeing a shift in other banks to lower their rates as well?

This is an important question for the borrowers as well as the lenders for it impacts the business trend between banks.

If the competing banks believe they need to to stay competitive then it is likely that we will, however, if they have the advantage to keep them ahead of their competitors then they will have no need.

It is hard to say for sure if the other banks will follow in suit and lower their interest rates but that is genuinely …

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Will Specialist or Sub-Prime lenders be better off?

With the news coming out daily about prime lenders facing higher and higher impairment charges it begs the question of who will do better during a downturn, specialist/sub prime lenders or prime high street banks?

Banks stated that they feel impairments of up to 90 basis points were likely, some have revised this figure higher several times with NIB predicting impairment of upwards of 300 basis points. Sub-prime lenders on the other hand start off with predictions of high impairment and they price and gauge the risk accordingly from the outset. Given that starting point, could it be a case that Irish specialist lenders may come out the other side of the liquidity crisis with an overall book that fares proportionately on margins than other prime lenders?

To answer this question we must first consider margins, with many banks typical margin is from 1% to 1.5% on average, however, with many prime lenders this margin is  lower because of low margin trackers that were a point of heavy competition between …

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Ulster Bank, cutting out brokers, and perhaps Consumers too?

I guess the best thing to do is quickly outline the way things have worked since the inception of the broker industry in Ireland.

Brokers start their own companies and place business with larger companies, there are several types of brokers, some are tied (this means they only place business with one company) and independent – which is what Irish Mortgage Brokers are – and we have a panel of 15 banks and 5 insurance companies.

We have traditionally been paid 1% of the loans we send a bank as a ‘commission’ or income, so the client normally doesn’t have to pay a broker fee because the costs are covered by the commission. Brokers are paid because broker business (which counts for almost 60% of all mortgages done in this country) is a clean and profitable source of business for banks, they don’t have to pay for the brokers staff, their light, heat, holiday time etc. They do however have to pay for all of these things when a loan is done at branch level (e.g.: the loan is done …

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