FirstMortgage.ie Blog

Bank Bailout

2010-12-11T13:46:00.000-08:00

Banks borrowing from the EU - ECB
Just look at the rise in the amount of money borrowed by Irish banks over the past year. This time last year it was €78B, (€78,000,000,000) that is a lot of money, now its over €136B, (€136,000,000,000), that is enough to create 136,000 millionaires, anyway you look at it, that is an increase of €58B.
With the amount of bank lending to both personal and business customers falling, where is the cash going?
It would appear the money is coming in one door and out the other.
The money comes in from the EU / IMF and appears to be paid back to the bond holders (as their bonds mature) the bond holders in turn place it back with another bank who in turn deposit it with the EU etc. What else can they do with it?

The only way to save a bank in crisis is to provide it with free money, yes "Free" money, which it can lend at competitive rates, make a profit and pay back the capital in as short a term as possible.
The deal we have from the IMF / ECB / EU will cost us for decades,
Maybe a bout of hyper inflation would save us, any thoughts?

Pensions

2010-10-20T16:57:00.000-07:00

If you were asked: "What is a pension?", what is the first thing that crosses your mind?

This is what should cross your mind:
If you do have a pension, you're retired because a pension is a payment from an accumulated fund and you are enjoying the benifit of years of income earning. If you are not drawing a pension, when did you last seek a report on how your fund is doing? If you haven't asked in the past year, make that call Now!

If you don't have a plan to accumulate a fund, start soon. I hear you asking why? and why now?

2 reasons come to mind.....

1. The government are going to come under increased pressure to amend the tax relief available to higher earners. Let's say you are a PAYE earner and lets say you paid €100 in tax. You can now direct at least €41 of that into a plan to accumulate a pension fund. Add in PRSI and you save even more.

2. Over the past few years people have been saving their cash. I should know, our savings inflows are through the roof. The cash hoarding over the past few years has been massive. At some stage that cash will seek to make a real return over inflation and that will create a surge of investment in the equity markets, which will in turn drive the markets up.

Timing is all important. Now is the time to make the move. If you want advice, give me a call at 021 4892050. At the very least, contact your own financial advisor.

Credit Councelling

2010-10-20T16:52:00.000-07:00

If you go down to your bank today and you are worried about going into arrears, or you are already in arrears, you are in for a big surprise. Or are you?

What do you expect from your bank manager? That is, if you can get to see him or her. Chances are you will end up discussing your problems with some staff member, but do they really have the expertise to put a package in place to help you dig yourself out of a financial trap?

Do you know what sort of deal you can afford?
Are you aware of what you should expect from your lender?
Who is going to mark your card and advise you?

With nearly 35 years experience in personal financial management, I have found there is nearly always a way to solve a financial problem. If you need help in trying to put a plan to gether, give me a call 021 4895020.

Life Assurance

2010-10-20T16:51:00.000-07:00

Did you ever think: What will happen to family if I am not hear to make the repayments?

To put it bluntly, unless your family are prepared they will suffer. Talk to a financial advisor about Life Assurance.

Mortgage Tax Relief

2010-10-20T16:46:00.000-07:00

In recent budgets the government sought to dismantle and end Mortgage interest relief on the basis that it was an unfair tax relief to those wealthy enough to acquire a mortgage to buy their own home.

I propose such a view in too simplistic. There are many borrowers struggling to repay their mortgages, not just because of unemployment, but also the significant impact of reductions in net take home pay caused by increased taxes, income levy and salary reductions which are imposed by employers trying to sustain an existing business and keeping people employed in the long term. NAMA is out there to help the struggling banks and the wealthy banks who are not in need of help are not crying out that it is unfair.

If the government can't give borrowers a NAMA type leg up, then the re-introduction of mortgage interest relief even at 15% for the life of a mortgage would be a low cost but very effective support to hard pressed borrowers. Why are they not implementing such relief?

Right time to Buy

2010-10-20T16:33:00.000-07:00

Today, I received a call from a concerned home buyer. He was unsure what to do or who to believe when trying to make a decision about weither or not to negotiate on the purchase of a home.... what advice would you give?

This is what I told him:
1. It seems likely NAMA will off-load properties sooner than later. This will create an even greater over supply in a saturated property market than before reducing property values and prices.

2. As I have already advised (in a previous post), lenders are tightening their respective belts on the granting of credit, which will also cause house prices to fall.

3. Interest rates are going to rise further, a direct result of our depressing public financial position. Our debt ratio could be as high as 19.5 % of GDP, which will increase the cost of borrowering on the money markets for the banks. As the cost of money rises, borrowers will not have access to the same levels of credit (mortgage loans) as before, which will also dampen house prices.

4. There is more depressing news. More and more of our young adults will leave Ireland over the coming years in search of work. This will reduce demand for both rental and owner occupier property, which will also drive prices down.

Sounds depressing, well, it is, but what can a buyer do about it: Get professional advice about property values before you negotiate.

House Prices

2010-10-20T16:15:00.000-07:00

Do you believe house prices are going to bottom out soon? If you think yes, think again! Look at it simply, If you don't have pots of money you can't buy what you want when you want it,

If you don't have the cash when you want to buy something you have to borrow, simple? .....well yes and no. It is true people who can, will borrow money and will use that money to buy what ever it is they want, but the more money they borrow, the higher the price they will pay.

You might be thinking, but the Banks are not lending. Not true, they are, but they are now very selective. Gone are the days of increasing market share. Now its about being selective, credit criteria have tightened and the most important of all is Income. No matter how honourable a borrower is, no Job = No income = no pay, but if you have a good Job you are in with a shout.

Lets be clear, for the Irish Property market to stabilise and begin to move upward, we need to maintain the numbers of people employed, even increase the numbers. If we can deliver on the jobs front, we will pay less in support payments, increase tax revenue and restore confidence in the future. If businesses could be encouraged to offer short working weeks to staff so as to create job opportunities, our young school leavers or graduates would be able to get a bit of experience and make a contribution rather than take a handout, which anyone unemployed will agree is soul distroying in the long term. This would be a small but important step in the right direction.

There is enormous potential out there for job creation, so lets get on with it. If we do, we can turn this mess around and not depend on others to do it for us. I am sure if we make an effort we will get the support at home and away.

Property

2010-10-20T16:09:00.000-07:00

Recent observations and statements from people in the know point to a dismal time for property owners who are selling just now. The bad news is, based on the latest information, that it looks like it is going to get even worse. Don't be surprised if house prices continue to fall over the coming 12 months before they hit bottom.

If you are buying, take my advice: Talk to a professional.

If you owned property before, you have some idea of what is involved as a home owner, but if you are a first time buyer you really need someone to help you through the property minefield. Over the last 34 years I have helped hundreds of people either buy or sell property and kept many of them from making costly mistakes.

One small tip. Before you start, work out what for you would be the ideal house (size, location, features, access etc). Once you have a set of ideals, use this to measure one real property versus another. It may be a difficult exercise to sit down and map out your preferences, but if you truly understand what you are looking for before you walk out into the property market, you are guaranteed a better deal.

Credit. Can you get it?

2010-10-20T16:07:00.000-07:00

Access to credit has become more difficult for borrowers. Only a couple of years ago even people with questionable incomes could borrow large amounts of money over very long terms of up to 35 and 40 years. In the past few weeks, banks have reset credit criteria rules. Even if your income has not reduced recently, the amount of money you can borrow now is less than it was a few weeks ago.

If banks don't lend......People can't spend

This will dampen demand and impact prices. If this is true is it a good time to borrow and spend? or should you save in the short term and spend later? Even if you have access to credit, would it be the right decission to use it?

To Buy or Rent

2010-10-20T16:03:00.000-07:00

Money is cheap, but if you can't get your hands on it, it dosen't matter how cheap.

Over the past two years the property amd markets driven wealth of many middle and upper class individuals has shrunk considerably. Property values down by 50% and stocks, depending on which stocks, for example financials, down by 90% in some cases, nasty!

With Governments from the USA to Europe and the UK tightening their respective belts it's going to be a while before we see any real recovery in the fundamentals, like employment growth and consumer confidence, which will encourage domestic and international demand for goods and services. If ever there was a need for a global response to what is a global economic mess it is now. The last thing we need is a spate of protectionism measures.

I for one advocate rewarding people for better use of resourses. If we can "globally" reduce waste we can reduce the demand for scarce resourses and commodities, dampening inflationary pressures, restoring competitiveness and the belief among the nations of the world that there going to be a tomorow, a next week, a next month and hope in the future.

Some argue people spent their future by getting deeper into debt like there was no tomorrow, I beg to differ. I propose that people spent because they believed in tomorrow and next week and importantly in next weeks pay cheque. They had confidence in the future. What we need now is confidence and heaps of it.

Gerry

Fixed rate mortgages March 2010

2010-03-15T16:20:00.001-07:00

Financial institutions have recently indicated they will shortly increase variable mortgage rates. If this is true, should you fix the rate of interest on your mortgage?
Simple answer is yes.
But before you do, go and talk to your provider, make sure you understand the benifits and the down side before you take the plunge.
It is expected variable mortagge rates will rise to over 4% within 12 months, and some providers are offering fixed rates for 5 years at less than 3.5%, so while there will be a time when the rate you pay will be higher for a short time, in the long run the variable rate will be higher, by how much we cannot predict, but at least you will have the peace of mind knowing, you repayment will not change until the end of the fixed rate term.
If you have a query, send me an e-mail,

Gerry

Refinancing......what to do!

2010-01-03T12:55:00.000-08:00

2010 will begin with many borrowers worried about rate increases and decreasing pay due to higher taxes and simple reductions in basic pay.
You will think about how to reduce the cost of loan repayments, and you will be encouraged to lump all your loans into one loan, probably over a longer term, so as to reduce the monthly repayments............ to save you money.............Yeh!

well more times than not............................NO,

you won't save money, you will just pay less for longer but the longer you pay, the more you pay in the long run, I know this sounds like a contradiction, but it is true.

If you want to know how to wise up and not be fooled by quick talking financial sales people, e-mail
info@mobilemortgages.ie or phone 086 8 33 33 33 we will help you to make the right decision!

Gerry Owens QFA

Fixed mortgage rates, to fix or not to fix, that is the question?

2009-11-30T11:35:00.000-08:00

It is clear from reading reports over the past few months and weeks that Irish lenders are giving their clients better value than their counterparts in the UK.
Just look at the facts, the base rate in the UK is only 0.5% and the average mortgage rate is over 4% APR, in Ireland the ECB rate is 1% and the average variable rate is about 2.7% APR. Considering, lenders are paying high rates for deposits, for example some institutions are paying 3.5% on deposit, there is an imbalance that will be corrected sooner than later.
But what does this mean, for rates going forward?
It is obvious Irish lenders are going to have to increase their variable mortgage interest rates, one lender bucked the trend earlier this summer,and increased thier lending rate, but the other are only waiting until the time is right, post NAMA to increase their Variable rates, and will most likely also reduce the rate paid for deposits.
By how much will rates rise? that is the $64 question? but it is fair to say, it will be an increase of at least 0.5 to 0.75% and that is separate to what ever the ECB does next year, and we all know the ECB will increase rates sooner or later, but most likely later, so watch this space.
Now for fixed rates, currently fixed rates are about 4% for three years and 5%+ for 5 years or so.
So to answer the question, what do I do about fixed rates?, if you are looking to save money, then fixing may not give the result you want, because interest rates, may only rise to about the fixed rate and then crest and fall back again, with no saving.
If you want the security of a fixed repayment for a period of time, then take the best rate you can get on a day, with your lender of choice and then forget about rates for the term chosen.
If you have a question, feel free!
Gerry

Welcome

2009-08-20T06:50:00.000-07:00

This is a blog created by Gerry Owens of FirstMortgage.ie to compile a basket of knowledge on the subject of property markets and mortgage lending.