A HOUSING initiative to be launched today will see social housing applicants and tenants able to buy new houses at discounts of up to 60%.

The Incremental Purchase Scheme will allow approved housing organisations tooffer new houses for sale for the first time ever.

Social housing tenants and persons who have beenassessed as having a housing need will be able to avail of discounts ranging from 40% to 60% of the total cost of a new home depending on income.

The scheme will also place responsibility for repair, maintenance and insurance of the home on the new owner.

It works by transferring full title to a new house to the purchase on payment of between 40% and 60% of the cost of the property.

A charge is placed on the property in respect of the discounted amount which declines in annual increments of 2% until the charge is eliminated, while the buyer takes out a mortgage to meet the remaining cost.

There is no release of the charge if the property is sold within five years.

However, it can be sold at any stage at market value with the housing authority being repaid from the proceeds the amount of the outstanding charge. But the housing authority will have first option on buying the property in the event of it being sold during the charged period.

The scheme is also structured to make it attractive for people to put down long-term roots in the community and to commit to an area.

Housing Minister, Michael Finnernan said the objective of the scheme was to make it possible for households with income substantially lower than that required for affordable housing to start on the path to home ownership.

Households must have a minimum gross annual income of €15,000 in order to be eligible for consideration for the new scheme.

“The scheme offers the earliest possible start on the path to home ownership for those willing and able to undertake a house purchase,” said Mr Finnernan.

He claimed the scheme’s benefit for the Government is that it would provide an opportunity to extract additional value for money from capital expenditure through its social house investment programme.

“In the current economic circumstances, it is important that we use all available resources to their fullest potential to meet the challenge of providing suitable accommodation for those households in need of it,” said Mr Finnernan.

The scheme is a central element of the Government’s housing policy, “Delivering Homes, Sustaining Communities”.

The minister will also announce today that he intends to bring an end to the current tenant purchase scheme which was first introduced in 1995.

Mr Finnernan has instructed all housing authorities to notify existing tenants of this decision to enable them to have an opportunity to purchase their home under the current scheme.

The Government is planning to introduce legislation next year for the sale of existing local authority houses to tenants based on the incremental purchase model.

PERSONAL FINANCE: DOES ONE MISSED mortgage payment doom you to a life denied access to credit? Or if you messed around with a credit card when you were younger will this make it hard to get a mortgage now that you want to settle down? Given the difficulties faced by many people at present when it comes to settling their bills, understanding your credit rating – and looking at ways of improving it – has never been more important.

When you borrow money from a financial institution, you automatically give your lender permission to send information about your repayments to the Irish Credit Bureau (ICB). So, any late or incomplete payments could condemn you to a life without the ability to borrow, as potential lenders may run a check on your credit history before lending you any money. Without a good credit rating, you may find access to credit very difficult, or where it is available, it may be more expensive, as is the case with sub-prime mortgages.

“It’s the key to getting finance in the credit society we now live in,” says Frank Conway, a director with the Irish Mortgage Corporation. “You’ll find it near impossible to do so if you have negative comments on your credit report.”

John Lowe, financial adviser with The Money Doctor agrees. “It can be impossible to get a loan – not only do you have to prove that you have an income, but you need to have a squeaky clean record, and banks still have a reluctance to lend.”

For Bank of Ireland, a person’s credit rating is an important factor taken into account in the lending decision, “as it demonstrates the customer’s payment history on previous/current borrowings with Bank of Ireland and other financial institutions”.

At AIB, “the financial track record of our customers is important in assessing applications”, but the bank also adds that it is “chiefly concerned with a borrower’s sustainable capacity to repay any sums advanced”.

Given how easy it is to get a copy of your credit rating, if you have any concerns over your credit history you should apply for your report. While all information recorded should be correct, mistakes do happen so keeping an eye on what information is being kept in your name is a prudent move.

Lenders send information about borrowers who have mortgages, car loans, personal loans, leasing/hire-purchase agreements and credit cards and your report includes information such as the names of lenders and account numbers of loans you currently hold, or that were active within the last five years; repayments made or missed on these loans; and any legal action taken against you. To get a copy of your report, you can apply online, at icb.ie, and for a fee of €6 you will get a copy of your credit report within three to four working days.

The ICB collates all the information it receives on you from the various lenders from whom you have borrowed money, and from this produces a Credit Bureau Score (CBS), which indicates your future ability to repay a loan. The factors which go into determining this figure include values such as the number of previous late payments, number of accounts, and number of previous applications for credit in the preceding 12 months.

The ICB stores information about borrowers and their loans for five years after the loan is closed, or in the case of a judgment against you, it is stored for life.

Before you start panicking that you’re going to have all your lines of credit cut off because you recently switched from Halifax or PostBank to another bank and your direct debits were late in being set up, relax. According to Conway, if you’re three days late with your mortgage repayment, this won’t be reported to the ICB. Where problems arise however, is when you go over 30 days, although even then such instances aren’t always reported to the ICB, which, it should be noted, is owned by lenders including AIB and Bank of Ireland.

“The anecdotal evidence is that lenders don’t always pass it on,” notes Conway, although he points out that where problems arise is where you are persistently late giving rise to 90-day delinquencies.

Indeed banks themselves have their own reasons for not passing on such information. Given the rapid deterioration of the economy, and the resulting decline in incomes, there are now many people who, under normal circumstances, would be able to pay their bills, but now find themselves unable to do so. If the banks can’t lend to them when the economy turns around, it will affect their business in the future.

“If too many people have marks on their credit reports then the banks won’t have too many people to lend to in a few years,” says Conway.

As such, it is perhaps no surprise that the Central Bank, in its recent report on banking supervision, recommended the establishment of a central credit register which would collate comprehensive data on the debts of consumers.

For Conway, the increasing sophistication of the Irish credit reporting system is inevitable, saying that the process is likely to become more automatic in the future, rather than being done at the behest of the lenders.

In the meantime, if you are struggling with your debts and are concerned about the impact this may have on your credit report, the advice is to repay your priority loans first.

“Mortgage delinquencies carry more weight so pay off your mortgage first, there will be much more serious repercussions if you don’t,” warns Conway, adding that some unsecured lenders, such as credit card providers, are particularly aggressive when it comes to collecting their money. However, you shouldn’t let their persuasiveness put you off making your mortgage payments.

If you are having problems meeting these repayments, remember that a bank will be loathe to offer you any sort of restructuring if you’re going to use that money to pay off another creditor such as a credit card provider. So prepare a detailed income and expenditure report to argue your case. And, if you’re looking for any sort of payment holiday or moratorium, remember to ask your lender how it will impact on your credit report.

Will they for example, report that as a violation or will they treat it as sticking to the terms of your mortgage contract? If you do find yourself in a position where your credit score has been hit, unfortunately there isn’t really anything you can do to rectify the situation. However, what you can do is ensure that it isn’t made any worse.

For Conway, there are a number of steps you can take in order to achieve this. Firstly, he advises that you engage with your creditors, asking whether or not any delayed or incomplete payments will be reported to the ICB as a delinquency or violation of contract. He also recommends that you stick within the limits set on your current account, and only use credit where necessary, in case you forget to repay it. Moreover, if closing an account you should always ensure that your direct debits move seamlessly to the new account – if not you could exceed the 30-day limit.

Lowe suggests that when seeking credit again you make every effort to be consistent with your repayments following any lapse, and to try and offer the lender some rationale behind your lapse, for example that you lost your job but are now in permanent employment again. However, this may not always work.

“Some will take it on board, but some won’t,” he says, noting that sub-prime lenders, who traditionally catered for those with poor credit histories, have now “gone to ground”.

 13 Dec 2009

What the finance minister has given with one hand – an extension to mortgage interest relief – he has pledged to take away with the other, writes Neil Callanan
Brian Cowen: long-term spending mistakes

Much of the talk in the property industry last week focused on the mortgage interest relief measures being introduced by Brian Lenihan. If you’re in negative equity and were facing a hike in your mortgage repayments whenever your relief expired, you can now continue to claim relief until 2017, when the relief will be entirely abolished.

But in the exchequer’s straitened circumstances, what Brian Lenihan gave with one hand he has to take away with the other, and all property owners are now facing a property tax. This makes sense, given there is a desperate need to broaden our tax base, in part to compensate for the mistakes of Bertie Ahern and Brian Cowen who made disastrous long-term spending decisions based on income such as stamp duty that was not guaranteed past the short term.

A property tax of 0.25% to 0.33% would raise €1.5bn-plus a year and alleviate our fiscal hangover, according to Derek Brawn, former investment banker author of a book about the property bubble, Ireland’s House Party.

Property consultant Knight Frank Ireland, however, said that while it welcomed the extended mortgage interest relief, it is “unhappy that [Lenihan] has introduced a note of uncertainty in announcing plans for a future property tax without any indication as to how this might be applied” and that the uncertainty “may act as a brake to purchasing decisions” until the details are known.

In truth, though, Lenihan has little choice in the matter, although it will be interesting to see how quickly the land registry required to administer the tax can be set up. Anybody who has to trudge from the Valuation Office to the Registry of Deeds to try to find the owners of unregistered land will understand the frustration involved. A computerised solution will have to be found, but one of the upsides is that a realistic house price survey can be done as a result; too many of the indices underestimated the rate of house price increases during the boom and have failed to get even close to the 50% drop on the way down.

Also of potential importance is the National Solidarity Bond, which will reduce the National Treasury Management Agency’s reliance on overseas funding. The bond will allow people to invest in capital investment funding for five, seven or ten years, in return for an interest payment and a final redemption bonus when the fund matures. The Finance Bill will provide the meat on the bones of the proposal. The Construction Industry Federation believes the government’s decision to cut nearly €1bn from its capital investment programme in the budget will hit the exchequer through lost tax income and increased social welfare payments because infrastructure projects are, by their nature, labour-intensive. Targeted spending through the bond will help alleviate that.

The restriction of tax reliefs for the wealthy was also a welcome move. Many of these reliefs led to the construction of unviable properties purely for tax breaks; many were hotels which are now in trouble and which will end up being owned by the taxpayer through Nama. Tax reliefs also played a key role in fuelling the property boom, causing other properties near them to rise in value. In future the use of tax reliefs and exemptions by high earners will increase the effective rate of income tax on income sheltered by such reliefs to 30% from 20% while the entry relief will be halved to €125,000. The question of why these property reliefs were allowed during one of the biggest property bubbles of all time has never been adequately answered.

Also worth keeping an eye on will be the “efficiency review of the local authorities” which the Society of Chartered Surveyors supports, saying that “streamlining the number and operation of local authorities will facilitate efficiencies in management structure”. It believes consolidating local authorities “should lead to improvements in coordination and implementation of planning and development policy”.

Local authorities face a funding crisis in the coming years from a lack of levies from property development and it’s unlikely an “efficiency review” will change that. The return of the pothole is nigh.

13 Dec 2009 

A complete ban or long delays on repossessions is going to be difficult for the banks who use their mortgages as collateral for their own borrowing, reports Jon Ihle

Last Wednesday, just in time for the budget, Moody’s issued a press release highlighting further deterioration in the quality of securities backed by Irish residential mortgages.

Delinquent loans – those overdue by three months or more – reached 2.9% of total loans in October, the agency said, double the amount from the year before. Borrowers more than a year behind on payments hit 0.7%, an increase of 300% over last October.

Why does Moody’s, a bond-rating agency, care about Irish mortgages? Because the banks who issue those mortgages use them as collateral for their own borrowing, which is done by wrapping the mortgages into bonds and either selling them or lodging them with a third party, such as the European Central Bank, in exchange for cash. So mortgages are crucial not just to a bank’s profits and capital, but for access to funding.

Although Moody’s acknowledged in the statement that Irish mortgage-backed bonds had not yet reported significant losses, the analysts worried that delays in foreclosure on bad loans – very common in repossession-averse Ireland – would only lead to higher losses later on. When that happens, the banks who depend on these bonds to raise money for new lending are going to face a funding problem as counterparties refuse to provide fresh cash.

So the banks are facing another conundrum: mortgage arrears are rising, but tough collection action is impractical due to social, political and economic reasons. Yet if they don’t curb loan-delinquency, the banks won’t be able to pledge mortgages for new money to fund lending. In fact, the various measure banks are using – and the government is insisting on – to keep delinquent borrowers from defaulting and losing their homes could ultimately cut off vital credit to the economy down the line.

Less than two weeks ago, Fergus Murphy, the chief executive of EBS, and his chief risk officer Fidelma Clarke met the Oireachtas Committee on Social and Family Affairs to discuss mortgage arrears and defaults and to consider ways banks, the government and borrowers could work together to address the problem.

Murphy and Clarke aren’t the only bankers interested in this issue. It’s an industry-wide concern. And government is waking up to the growing numbers of people – 35,000 at last count – who are missing payments on their mortgages and raising fears of a second-wave crisis in the banking sector.

The banks have so far tried to deal with rising arrears through borrower-friendly mechanisms, such as the Irish Banking Federation’s (IBF) protocol with the Money Advice and Budgeting Service (Mabs), which sets out a formal debt-recovery approach that seeks to avoid a more antagonistic method, such as repossession proceedings. But bankers are concerned that the clock is ticking on the various forbearance measures they use to keep from seizing loan security.

There is a recognition in the banking industry of the value of forbearance as a short- to medium-term measure to address difficulties some borrowers are having paying their mortgages, but in the long-term bankers say something else is required. Nobody has a definitive answer yet – although there are several strategies under consideration by lenders – but there is a realisation too that whatever replaces the current ad-hoc approach must avoid disrupting the banks’ funding, which depends on using mortgages as collateral for credit lines from institutional investors.

This is what Clarke had to say to the committee on the subject: “The way the system works is that institutions use loans as collateral for lines of credit for wholesale funding purposes and liquidity. Any damage to any contract as would be seen by an international investor, could have unattended negative consequences for the Irish banking system. If all covered bonds, securitisations or liquidity facilities with the ECB were no longer deemed to be of the quality people thought they were signing up for, they could be downgraded.”

The main concern emerging in the capital markets revolves around the uncertainties caused by forbearance measures such as interest-only periods, payment holidays and moratoriums on foreclosure. Bond investors want to be sure of their coupon payments; forbearance introduces some uncertainty. For example, last month when the IBF announced its members would extend delays on repossession action for an extra six months, a number of nervous UK bond analysts contacted the organisation with questions about how this would impact the funding side of the banks.

The ratings agencies who grade mortgage-backed bonds for their quality have picked up on this, too, as Moody’s recent attention shows. The ratings and the other bond analysts reflect a sensitivity in the bond and securities markets about the safety of any investment where the prospect for regular payments is uncertain.

Under normal market circumstances, the banks would be lending enough year-on-year to replace old loans as they matured. But because of the property crash, lending volumes are only about a quarter of what they were at the peak. That means as time goes on, more and more of the banks’ loan books are made up older loans, many of which were granted on overpriced properties during the boom. As unemployment, pay cuts and tax rises continue to wreak havoc on incomes, banks are naturally facing higher levels of arrears on these loans, leaving a smaller and smaller proportion of good loans to replace them.

According to Bloxham Stockbrokers, which was commissioned by EBS to research possible solutions to the arrears’ problem, there is a risk that concern about the potential reaction among bondholders could be used as an excuse for denying debate and evaluation. Bloxham seems to think alternative structures could be explored without spooking providers of long-term liquidity to the banking system and EBS brought several suggestions to the table, including the idea of a sector-wide refinancing plan for the hardest-hit borrowers and a more general mortgage insurance fund similar to the bank-deposit fund that traditionally has guaranteed savers’ money. Dolmen Stockbrokers analyst Oliver Gilvarry believes the government may ultimately have to set up a state mortgage bank to absorb troubled loans.

But both the banks and the government will have to tread carefully here, as the whole point of the bank-guarantee scheme and Nama is to assure funding lines into the Irish banking system so that normal credit is available to both consumers and business.

Momentum is gathering both in the financial industry and in government behind some form of mortgage rescue scheme. Since Green energy minister Eamon Ryan got the issue into the Programme for Government in October, it has become a significant issue on the political agenda. But the mechanics of any package – for borrowers or lenders – are far from being worked out. Ryan has put together an interdepartmental group made up of senior civil servants to assess option.

But capital markets and debt investors will have to be assured that any systemic solution to the mortgage arrears problem is sound, otherwise they could pull vital lines of credit from the Irish banks, which would prolong the recession and heap more misery upon cash-strapped mortgage borrowers.

Causes of rising mortgage arrears

» Unemployment: there is a direct relationship between the unemployment rate and mortgage arrears. With unemployment at 12.5% and due to climb in 2010, the outlook for arrears is getting worse. Even if the economy begins to grow towards the end of next year, bank analysts expect arrears to increase as job growth will lag GDP growth.

» Pay cuts: falling incomes mean the houses people bought at 2006 prices with 2006 wage expectations are a lot less affordable.

» Higher taxes: the crisis in the public finances has spilled over into household finances as new income and health levies have eaten into take-home pay.

» Non-mortgage debt: car loans, overdrafts, credit cards and personal loans add to the debt burden. While Central Bank figures show credit card balances, for instance, are declining, judgments on personal debt defaults are rising – and so are the amounts being sought.

» Falling house prices and negative equity: once the value of your house falls below the amount you owe on it, selling is no longer a viable option for getting out of debt trouble. The housing market is so sluggish that quick sales are all but impossible anyway, trapping even willing sellers.

Rules on repossession

Although repossession rates have been rising steadily over the two years of the recession so far, the gross numbers are still relatively low.

The reason for this is, firstly, the protocol agreed between the Irish Banking Federation and Mabs, which sets up a formal process for debt recovery designed to avoid foreclosure if possible, and delay it if not, and, secondly, the government code of conduct on mortgage-lending for banks under the guarantee scheme.

The IBF/Mabs protocol requires banks to adopt a partnership approach with Mabs when pursuing debts. It also lays out a five-step process leading to a formal payment plan for troubled borrowers which is then monitored and reviewed on a six-month basis. This approach meshes with the IBF’s own pledge to give six months’ grace on mortgage arrears on top of the statutory period.

The government’s code of conduct on mortgage lending says lenders must adopt flexible procedures for handling mortgage arrears and assist the borrower as far as possible with deferral of payments, extending term of mortgage, changing type of mortgage, or capitalising arrears and interest. They must also must wait at least six months (12 months for the two recapitalised banks, AIB and Bank of Ireland) from the time of arrears first arising before applying to the court to commence legal action for repossession.

02 Dec 2009

European Central Bank governors meeting tomorrow are expected to leave their main interest rate unchanged at a record low of 1% while preparing banks for a gradual end to massive supplies of central bank cash.

ECB president Jean-Claude Trichet will carefully avoid suggesting that interest rates might start to climb before economic recovery is well underway, however. The debt crisis in Dubai will also hang over the meeting in light of possible repercussions in euro zone countries.

But analysts say that this week’s ECB meeting should bring the first steps towards a gentle backdoor exit from unorthodox monetary policies aimed at boosting economic activity.

AdvertisementThe 16-nation euro zone has emerged from recession with unemployment at 9.8%, its highest level since December 1998, and Trichet warns often that the economic climate remains uncertain.

ECB staff projections for growth are nonetheless expected to be revised upwards from the last estimation of a 4.1% contraction this year and 0.2% expansion in 2010.

Meanwhile, inflation is back in positive territory for the first time in seven months but likely to remain below the ECB target of just under 2%.

The ECB has held its main rate at 1% since May, above the US Federal Reserve’s rate of around zero and the Bank of England’s main rate of 0.5%.

The ECB has sought to boost bank lending by providing unlimited amounts of central bank cash at that rate, including record one-year loans of €442 billion in June.

21 Aug 2009 

€4.7bn slump in lending highlights business and housing woes

The banks continued to tighten the screws on credit lines during the second quarter this year, with figures from the Central Bank showing lending to business fell by €3.3bn.

The dramatic decline in house sales is also reflected in the data, which shows the first quarterly decline in residential mortgage lending on record.

Overall, the Central Bank said there was a €4.7bn, or 1.2pc, decline in private sector credit during the quarter and that the fall was mainly due to write-downs on the value of loans by the banks. However, while it described the decline as “marginal”, it said that lending to all sectors of the economy fell during the second quarter.

It said lending to the property related sector was almost unchanged at €108.4bn.

Writedowns

However, on an annual basis, credit to the construction and real estate sectors fell by 3.7pc, with writedowns and rising bad debt provisions likely to have been significant factors in this drop. The decline compares with an annual increase of 17.1pc in the same period of 2008.

Property related lending accounted for 61pc of total outstanding private sector credit at the end of the second quarter.

A breakdown of the data shows a much bigger decline in lending to what are described as non-property, non-financial sectors.

This fell by €3.3bn or 6.2pc, with most of the decline due to lower levels of lending to manufacturing and wholesale businesses.

Overall, the sector saw its share of the credit cake fall from 12.3pc in the first quarter to 11.6pc in the second quarter.

Lending to the personal sector was down by €563m in the quarter with a fall of €368m in non-mortgage credit. This type of credit has now declined for five quarters on the trot, although the Central Bank said the rate of decline eased considerably during the quarter.

Residential mortgage lending accounts for the lion’s share of personal sector credit and was down by €194m in the quarter, the first such quarterly decline on record.

All categories of residential mortgage fell, with the combined decline in mortgages for buy-to-let and holiday home properties amounting to €38m. This was accompanied by a fall of €157m in mortgages for principal dwellings.

“The significant reduction in consumer credit witnessed in early 2009 eased somewhat during the latter part of the second quarter. This is consistent with the less severe pace of contraction in retail sales during the second quarter compared with quarter one this year, as reported by the Central Statistics Office,” the Central Bank said.

“Reduced demand for credit and continued tightening of credit standards by lenders are impacting on credit developments,” it added.

21 Aug 2009 

Property tax on every home in the country, averaging up to €1,000 a year, is among the recommendations of the Commission on Taxation, which will deliver its report to the Government in the next few days.

The report, compiled by the Government-appointed commission says that new taxes and charges should be balanced with reductions in other levies.

Measure such as taxing child benefit with a tax credit for lower income families to offset the impact, the introduction of water charges for every house, with water meters being installed at a later date, and a carbon tax on energy use are among the 250 recommendations.

The report also proposes replacing tax reliefs for the blind and handicapped with direct payments, scrapping artists’ tax exemptions, phasing out tax relief on bin charges and trade union subscriptions, and abolishing the PRSI tax ceiling so workers would pay on all income.

Abolished

In addition, it suggests a new SSIA-type pension for the lower paid with the State contributing €1 for every €2 paid by workers, a new tax relief rate of 30pc for pension contributions and a €200,000 cap on the retirement tax-free lump sum.

Tax relief would also be abolished for those providing student accommodation in the Gaeltacht.

The property tax would initially be a self-assessed tax with home owners asked to file a tax return giving an approximate value for their property. The lower paid and the elderly would be exempt from this tax.

The Commission says the tax should raise around €1bn for the Exchequer, but does not specify at what rate it should be paid.

To raise this amount, however, would require a tax of between €600 and €1,000 on each home and the money would be used to fund local authorities.

Initially, the scheme would be done through self assessment but this system would be replaced in time with a comprehensive valuation on every house in the State.

The imposition of water charges would raise another €500m a year towards the funding for local authorities. Any new property tax should be balanced by a lowering in other taxes such as the income levy, says the Commission.

The pension provision is aimed at encouraging the lower paid to take out a pension, since up to a million workers in Ireland have no pension provision.

Difficulties

Taxes on child benefit payments could create huge logistical difficulties, so the report also recommends considering other options, such as means testing the payments.

The report is expected to go to the Department of Finance in the next few days and is likely to be discussed by the Cabinet early next month.

21 Aug 2009 

THE Commission on Taxation has called for property taxes to be levied on all homes in the State, with a few minor exemptions.

The tax would initially be a self-assessed tax, with home owners asked to file a tax return indicating the approximate worth of their property.

Homeowners would be told to indicate if their home, for example, fell within a band of between €250,000 and €500,000. Other likely bands would be between €500,000 and €750,000.

If the property tax proposals are implemented, the average payment would be less than €1,000 per annum and could be in the region of €600 to €800.

Also recommended is that stamp duty be phased out with the implementation of a new property tax.

A transaction tax like stamp duty has proved to be hugely unstable as large amounts of money were generated from it during the housing boom, but the stamp duty tax take collapsed when the property market crashed.

The commission does not specify what rate the property tax should be set at. Instead it indicates that the new property tax should raise around €1bn for the cash-strapped Exchequer.

To raise this much would require a property tax of between €600 and €1,000 on each home. Members of the commission have agreed the property taxes should be imposed on all homes — except those of the lower paid and the elderly.

The proposal is that the self-assessment system would be replaced, in time, with a comprehensive valuation put on every house in the State.

Problems

It is likely this would have to be carried out by a much expanded State Valuations Office. However, the proposed new property tax is expected to run into the same problems as the disastrous property tax in the early 1990s, which was seen as hitting Dublin residents disproportionately.

The commission, which is made up of a range of people from accountancy firms, unions, employer bodies, academia and charity groups, was aware that house prices were tumbling. This means that owners would be unsure of the value of their homes, but the commission expects house prices to stabilise over time.

Commission members were also aware that retired people and the low-paid would not be able to pay a property tax and this should be taken into account, the report recommends.

As with the recommendation for water charges, funds raised from a new property tax should be used to fund local authorities.

Any new property tax imposition on households should be balanced by lowering the likes of the income levy, the commission says.

21 Aug 2009 

LATEST figures from the Central Bank show personal debt fell by €563 million in the second quarter of this year while mortgage debt was down €194m.

The bank’s figures show that overall the outstanding debt owed by private individuals and businesses was down 1.2% or €4.7 billion in Q2 of this year.

The bank said this was mainly due to write-downs of bad loans.

Yesterday Anne Breen, head of property research at Standard Life Investments said the Irish property market has still “some way to go” before reaching its low.

“The unsustainable peak in values reached in the Irish market compared with the rest of Europe mean its correction can be expected to be sharper and deeper than its European peers.

“Although there are signs of revival in the real estate market, with yields becoming more stable attracting international attention, capital values will continue to be impacted by rental declines going forward. We don’t expect the market to bottom until 2011,” she said.

Ireland’s banks face loan losses of about €35bn following the property bubble burst, the International Monetary Fund has said.

House prices have fallen 22% from their January 2007 peak, while banks have applied tougher conditions on loans as risks increase.

The decline “is mainly due to write-downs of existing credit arrangements and increased provisions for bad and doubtful debts”, the Central Bank said.

In the year to the end of Q2, personal sector credit was broadly unchanged, as falls in non-mortgage lending have been largely offset by the increase in residential mortgages outstanding over the year.

Meanwhile, Irish residential mortgage-backed bond delinquencies increased on expectations for a prolonged recession, Moody’s Investors Service said in a report.

The weighted average 90 days-plus delinquency trend reached 2.3% in Irish prime RMBS transactions in the second quarter, up from 1% in the year-earlier period, the report said.

Moody’s also notes that the weighted-average 360+ days delinquency trend stood at 0.37% at the end of quarter two 2009, which compares with 0.14% a year ago. Seven transactions recorded more than 0.60% of 360+ days delinquencies, while three showed more than 1.00%.

“The 360+ days delinquency trend is a lagging indicator, which means the full effects of the strong economic deterioration may not yet be fully reflected,” said the report’s co-author.

17 Apr 2009

The European Central Bank president has said the world economy faces a difficult year but will begin a recovery in 2010. 

‘Confidence today relies equally upon the audacity of our immediate decisions and upon the soundness of our exit strategies,’ Jean-Claude Trichet said in a speech in Tokyo.

He added that the ECB would decide next month on non-conventional ways - other than interest rate cuts - to boost the economy.

In a speech in Washington, International Monetary Fund managing director Dominique Strauss-Kahn also predicted a recovery in 2010 after the global economy moved through ‘deeply negative territory’ this year.

He said governments in advanced economies needed to fix their financial sectors by cleaning banks’ balance sheets of toxic assets, and had to be careful not to withdraw their financial stimulus measures prematurely.

US Federal Reserve officials gave mixed signals yesterday, with the head of the Atlanta Fed forecasting a return to growth later this year, but the head of the San Francisco Fed warning of the potential for an even deeper contraction.

The Atlanta Fed’s Dennis Lockhart told a conference in New York that the US recession would end by mid-year, with growth slowly picking up in the following months. But the San Francisco Fed’s Janet Yellen said signs that some US indicators were stabilising did not mean that the economy was out of the woods.