Hopefully the news will be good in relation to mortgage repayments before Christmas as most financial pundits are forecasting a drop in the ECB rate in December of 0.5%. This would be a reduction of approximately €42 per month for a €250,000 loan over 35 years……..fingers crossed its just the start of it…………..
New Mortgage Lending Figures Released
November 27, 2007 – 4:09 pm
Today saw the release of some timely information relating to the residential mortgage market in Ireland. The figures were released by the Irish Banking Federation in conjunction with Price Waterhouse Coopers.
One of the more interesting pieces of data released shows that mortgage switches now make up 17.4% of new mortgage lending. This has been driven by the following:
- increased customer sophistication amongst customers in relation to their mortgage rate
- increased media coverage of the competition amongst lenders for new mortgage business
- sizeable advertising spend by several key lenders in respect of mortgage switcher products, e.g. the “Switch and Save” campaign launched by Halifax / Bank of Scotland or the free legal fees campaigns run by several lenders including EBS
As could be expected, the figures report an overall drop of 25% over the last 12 months in respect of new mortgage lending with just €9 billion lent in the third quarter of 2007. However, the overall book of Irish mortgage business continues to grow and now stands at €136 billion.
The first time buyer segment makes up 19.1% of all new lending but this must be expected to fall further as many first time buyers sit on their hands and await further developments in the housing market before commiting to buying their first home. Further downward pressure will come from the new restrictions being placed in recent weeks in respect of the lending criteria on 100% mortgages with only state employees and professional grades continuing to be welcomed with open arms by lenders offering 100% loans.
You and Your Money Prize Winners
November 20, 2007 – 5:39 pm
At the You and Your Money exhibition in the RDS back in September, Blue Sky Mortgages ran a free draw for a new Apple iPhone. There were also three consolation prizes of giant bean bags. The draw was run to coincide with the launch of our brand new website.
The winner of the iPhone is:
Gerry Fitzpatrick, Maynooth, Co Kildare.
The consolation prizes were won by:
- John Norris, Portmarnock, Co Dublin
- Eoin Cullen, Swords, Co Dublin
- Sue Sexton, Nerney, Co Kildare
The draw was conducted by Connoll Fee McGailey, Chartered Accountants in Dundalk.
Well done to all our winners!
The GREEN Mortgage at BLUE Sky!
November 2, 2007 – 12:22 am
Confused? No need to be….
Permanent TSB has just launched what would seem like a brand new type of mortgage but it’s not really….
It’s a bit of a gimmick but as gimmicks go, it’s not a bad one. It is unlikely that you would avail of many of the offers (see below) but whatever happens a tree will end up being planted in your name.
Putting on our mortgage broker hats, our advice is to always seek out the mortgage that best suits your circumstances, i.e.
- Are you getting the amount of funds that you need?
- Do the repayment terms suit you?
- And is the rate competitive?
Then and only then should you be influenced by the little extras on offer. More mortgage advice from Blue Sky Mortgages.
As it happens, permanent tsb are competitive in several key areas at present so their ‘Green’ special offer could be a welcome freebie for many customers this winter.
Of course, the Green mortgage is available at all Blue Sky outlets.
Here are the finer details:
When a customer draws down a Green Mortgage they will receive:
A voucher booklet with 6 great green discount offers
1. 10% off a Botanic Greenhouse
2. €1,000 discount off a Shomera
3. 15% off a new bicycle at www.cycleways.com
4. Spend €150 at www.ecoshop.ie and receive a free electricity meter worth €42.
5. For solar powered needs go to www.solartechnology.ie and get 10% off
6. Free delivery on all water collectors at www.ecoshop.ie and get a 10% discount
The Tree Council of Ireland will plant a tree in your name and you will then be sent a certificate to indicate your sponsorship.
A chance to win one of 50 home energy surveys from National Energy Assessors. Once customers have completed the tie breaker question on the Green Mortgage Form they will be in with a chance to win an Energy Assessment. National Energy Assessors will conduct an assessment of the winning customers’ homes and advise them of any energy saving methods they could adopt into their home. In the case of accounts in more than one name, only one prize will be awarded.
Irish Housing Market - latest ESRI/Permanent tsb Data
November 1, 2007 – 6:10 pm
The latest Permanent TSB/ESRI House Price Index was published today.
At a glance, the latest index would appear to paint a relatively positive picture of the market and radio commentators on Newstalk 106 and RTE Radio 1 pointed to the index being evidence of the longed-for ’soft landing’ in the housing market. Unfortunately the index does not provide the full picture for several key reasons:
- The index fails to take account of inducements being offered by certain developers who are trying to sell new houses. Where offered, inducements presently can range in value from between 2% to 7.5% of the house value.
- Only the sale prices of houses are being tracked. Figures are based on completed transactions only. Therefore the figures are skewed in that they don’t take into account drops in asking prices that most of us have anecdotal evidence of - particularly in the second-hand market. Also, the figures are undermined by the fact that the number of transactions that make up the survey here in 2007 is likely to be much lower than the comparative period in 2006 or 2005.
- The figures are further affected by the lead in time from the ’sale agreed’ stage of a house purchase to the ‘completion stage’. For a second-hand house this could average out at about 10 weeks while for a new house this would be shorter if the house is already built or much longer if the house is not yet completed. Therefore, there is always a lag before the index catches up fully with what’s actually happening in the market.
- Finally, market sentiment is hard to pick up from these figures. One traditional method of testing sentiment is to look at the size of the property sections of the Irish Times, Irish Independent and The Examiner. While there are still plenty of properties being offered for sale, the days of 40-50 page sections seem to be gone for the forseeable future.
So what are we saying? More data please!
- For a start, it would be useful for the ESRI to also publish the number of transactions that make up their survey.
- Also, some reliable measure of the movement in actual asking prices would also be beneficial but it’s hard to see how this could be accurately compiled.
Finally, it has to be said that the Buyer’s Market is definitely here - and here to stay for more than just a short holiday. Gone, for the moment, is the requirement for rushed house purchases which has to be a good thing.
Full version of website launched today
November 1, 2007 – 4:44 pm
We have now added the remaining content and features to our website which was launched a few weeks back. The full version is now live - we hope you like it and we would welcome your feedback - good or bad!
Federal Reserve cuts interest rates - a good sign for Irish mortgage customers?
October 31, 2007 – 9:21 pm
Despite being widely predicted, today’s 0.25% interest rate cut by the U.S. Federal Reserve is a welcome relief to credit markets that have been affected badly by the recent credit crunch. This rate cut follows the 0.5% rate cut made in September and moves the federal funds rate to its lowest level since January 2006.
U.S. Mortgage holders are likely to benefit in the short term but European mortgage customers may have to wait a little longer. There is no guarantee that this rate reduction will be followed by a rate reduction in Europe but it does at least have the effect of exerting some downward pressure on rates.
As regards any future rate reductions, the Fed did leave the door open although many commentators felt that a signal was being given that a further rate cut is unlikely this side of Christmas. The effect of this was that Wall Street fell back a little after the announcement only to come back later in the afternoon.
100% Mortgages – The beginning of the end?
October 22, 2007 – 3:47 pm
Several of the business sections of yesterday’s Sunday newspapers picked up on the recent decision by First Active and Ulster Bank (both part of the Royal Bank of Scotland Group) to tighten their lending criteria for 100% mortgages.
What’s happened?
Up to now, both of these banks would have lent 100% of the purchase price to any customer who could prove a capacity to make the monthly repayments (also allowing for a stress test). Occupations, for the most part, were not given specific consideration. However, the new rules only allow for 100% mortgages being provided to those customers who have secure state jobs and young professionals with strong prospects of future earnings.
Why the change?
When lending money, banks worry about two main risks:
- The customer’s capacity to repay the loan
- The risk of the loan amount exceeding the value of the property
When it comes to 100% mortgages, most banks are taking the maximum risk in relation to point 2 in that any drop in the value of the property means that the loan does exceed the value of the property. Also, given that they are prepared to lend to most occupations, they are also taking close to a maximum risk in relation to point 1.
Clearly, Ulster Bank and First Active are no longer comfortable with these levels of risk and are reducing their exposure by only lending to specific professions. This doesn’t reduce the risk in relation to point 2 but does in relation to point 1.
Will the other banks follow suit?
In our opinion, the answer is yes. The pace at which they will follow is uncertain though. This will be driven by two key factors. Firstly, the banks will be keeping a close eye on the property market. Further falls in prices will mean more banks making this move. Secondly, this year has been the first year in probably 15 years where banks have suffered a year on year reduction in mortgage lending. The sales directors in at least some of the main banks will want to at least hold off until the new year before making any change that will reduce the level of new mortgage enquiries.
The next 2-3 weeks will be very informative. It is possible that all of the banks were planning this move but just did not want to be the first into the market with their change. If this is indeed the case, we could be in for a spate of announcements over the comings days. Watch this space…
Offset Mortgages - A valuable additional option or just a gimmick?
October 19, 2007 – 3:05 pm
First Active has been the main promoter of Offset mortgages in recent years and they have had quite a degree of success.
But what is an Offset Mortgage?
The simple explanation is that your mortgage account is in effect combined with your current account. Any credit balance on your current account is used to reduce your monthly interest costs on the mortgage, i.e. you are offsetting the credit balance on your current account against the debit balance on your mortgage.
And are they a good idea?
In some cases yes, in others no. As usual, no easy answers in financial services 
The simple rule of thumb is that the higher the balance that you usually hold in your current account, the more you will be benefit from an offset mortgage. However, the interest rate applied on an offset mortgage is typically higher than the standard tracker rate on offer, so if you tend to carry a low current account balance you are likely to end up paying more.
Also, the amount of money you are borrowing will decide how much you would need to continually have in your current account in order for the offset mortgage to represent good value for you.
I don’t know what a tracker mortgage is…
October 16, 2007 – 8:16 pm
Hats off to Cawley NEA / TBWA for their Financial Regulator ad that was first shown just over one year ago.
It’s not often that a financial services ad achieves anything close to iconic status but this one possibly does and it was followed shortly afterwards by the hugely successful Bank of Scotland / Halifax series of ads. However, for sheer staying power, it is the famous ad on a Dublin bus where the guy stands up to proclaim his lack of understanding of tracker mortgages that wins hands down.In case you are wondering, the answer is yes; it is still proclaimed in our offices by a customer every now and then. However, not so often that we can’t smile or laugh when it happens…
So, what is a tracker mortgage? For the record (and in case you too find yourself wondering about mortgages on a Dublin Bus or any bus for that matter), this is our definition of a ‘tracker mortgage’: It is a mortgage where the rate is linked to a predefined other rate such as the ECB rate. This is in contrast to the old “standard variable rate” mortgage where the rate would have been decided by the mortgage lender and would be based on competitive factors.
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