10 Nov 2009 

THOUSANDS of homeowners got a welcome reprieve this morning after the country’s 10 biggest mortgage lenders promised to give homeowners more time to tackle arrears before taking legal action.

The pledge came as it emerged that 1,000 mortgage holders a month are turning to the Government to help pay their mortgages.

The Irish Banking Federation has now said customers who cannot maintain mortgage repayments will be offered arrangements on a six month basis, with no legal threat during this time.

Under the code of conduct, lenders must wait six months from the time the arrears first arise before beginning legal action for repossession.

In the case of the two recapitalised banks, AIB and the Bank of Ireland, the moratorium is for 12 months.

Meanwhile, the Government expects to spend €60m this year helping homeowners to pay their mortgages — double the amount spent last year.

About 400 households are now getting an average of €367.40 every four weeks from the State to help them cover part of their repayments.

11 Nov 2009 

New figures show that the number of new mortgages given out in the third quarter of this year fell again.

A mortgage market profile - compiled by the Irish Banking Federation and PwC - showed that 12,189 new mortgages worth just over €2 billion were issued in the three months.

The number of mortgages was down 56.4% from the same period last year, and also down almost 4% from the second quarter of this year. The value of the mortgages was more than 62% lower than in the same period last year.

AdvertisementBut the figures showed that the number of mortgages issued to first-time buyers - while still well down from a year earlier - rose for the second quarter in a row. First-time buyers now account for almost 30% of the mortgage market.

Mortgages for investment continue to decline, and now account for 5.7% of the market

New figures show that the number of new mortgages given out in the third quarter of this year fell again.
A mortgage market profile - compiled by the Irish Banking Federation and PwC - showed that 12,189 new mortgages worth just over €2 billion were issued in the three months.

The number of mortgages was down 56.4% from the same period last year, and also down almost 4% from the second quarter of this year. The value of the mortgages was more than 62% lower than in the same period last year.

AdvertisementBut the figures showed that the number of mortgages issued to first-time buyers - while still well down from a year earlier - rose for the second quarter in a row. First-time buyers now account for almost 30% of the mortgage market.

Mortgages for investment continue to decline, and now account for 5.7% of the market

12 Nov 2009 

MORTGAGE lending dropped again during the third quarter of this year, but the quarterly rate of decline has slowed significantly since last year, prompting hope that the market may soon pick up.

The latest quarterly Mortgage Market Profile – jointly published by the Irish Banking Federation (IBF) and PricewaterhouseCoopers (PwC) – shows that 12,189 new mortgages were issued between the beginning of July and the end of September, with a combined worth of €2.14 billion.

In volume terms, this represented a 3.9% quarter-by-quarter decline and a 56.4% year-on-year decline, while value was down by 1.3% on the previous quarter and dropped by 62.2% on a year-on-year basis.

The volume of mortgages granted had fallen from just under 28,000 in the third quarter of last year to just under 11,000 by the first quarter of this year, before picking up in the second quarter of this year.

Of significance in the latest figures was the growth in lending to first-time buyers for the second consecutive quarter. The first-time-buyers’ share of the Irish mortgage market has now gone from 19.1% to just shy of 29% in the past two years.

IBF chief executive Pat Farrell said that available credit is still greater than consumer demand but that the slowdown in lending decline – while a move in the right direction, would need to be judged on the back of a number of quarterly timeframes before proof of any real upturn could be gauged.

“While the overall level of mortgage lending in the third quarter shows little change from the previous quarter, the rate of decline in activity that has been so evident over recent quarters now appears to be moderating.

“Significantly, we have seen an increase of nearly 500 over the previous quarter in the number of mortgages issued to first-time buyers and this important segment continues to build market share,” he added.

However, the Professional Insurance Brokers Association (PIBA) reacted strongly to yesterday’s figures, saying that they represented “bank propaganda” and glossed over reality.

“There is a freeze on mortgage and other lending that is preventing any element of normality returning to the market,” said PIBA Mortgage Services director Rachel Doyle.

08 Oct 2009 

THREE out of four mortgage holders have a variable rate mortgage, making them dangerously vulnerable to a rise in eurozone rates.

A new survey by the Central Bank shows that 80pc of homeowners with a mortgage either have a tracker or a standard variable rate loan.

Both of these types of variable mortgages are liable to hikes.

As soon as the European Central Bank (ECB) moves rates above their record low of 1pc, those with trackers will face a rise in repayments.

But people with standard variable rate home loans are vulnerable to rises irrespective of what the ECB does.

This is because lenders can increase standard variables whenever they want.

Permanent TSB has already upped its standard rate for existing customers, with other lenders indicating that they will follow suit.

The Central Bank study shows that 80pc of those with a mortgage have either a tracker or a standard rate mortgage.

This is up from 50pc in 1999, and Irish people have one of the highest proportions of variable mortgages in Europe, the paper by Central Bank economist Nicola Doyle entitled ‘Housing Finance Developments in Ireland’ indicates.

“There are 200,000 mortgage holders right now who are open to price rises at the whim of their lender,” mortgage broker Karl Deeter warned.

“Permanent TSB’s actions have already demonstrated that’s a real threat.

“As if negative equity and collapsing property values were not enough to contend with, they may also be forced to absorb higher profit margins which the banks want to charge in order to remedy their errors of the past.”

Mr Deeter said that most of the people in this situation were not aware of the threat and will not realise the risk until its too late.

However, there is no immediate threat of a rise in ECB interest rates, and economists believe they will be kept at 1pc until the third quarter of 2010.

The data is likely to add to European Central Bank caution not to withdraw its monetary stimulus prematurely when the ECB meets to decide interest rates today.

Economists believe the ECB will keep rates at a record low 1pc until the third quarter of 2010 despite signs the eurozone may have returned to growth in the third quarter of 2009.
Figures out yesterday show that the eurozone’s economy shrank more than previously thought in the second quarter of 2009.

This was because contributions from household demand and trade turned out to be smaller than initially estimated.

Gross domestic product in the 16-country area shrank by 0.2pc in the April-June period quarter-on-quarter and by 4.8pc in annual terms, compared with the previously reported falls of 0.1pc and 4.7pc, Eurostat said.

Irish Independent

13 Oct 2009

Mortgage holders face hikes of 40% or more in their mortgage protection premiums because so many people are claiming on their policies due to loss of earnings in the recession.

The latest company to confirm it is to raise the premiums is Genworth Financial, which has a 37% share in the mortgage protection market and which underwrites cover sold to many of the country’s top lenders.

In letters sent out by financial institutions through which Genworth Financial offers its products, customers were told the pricing of mortgage protection policies had been developed at a time when unemployment was at historically low levels and was based on the level of forecasted claims at that time.

“Unfortunately, as you are aware, the economic environment has deteriorated rapidly over the past year which has resulted in an unprecedented surge in unemployment in Ireland since the beginning of 2008,” the letters said.

“As a result Genworth Financial is experiencing a dramatic increase in the number of claims submitted for unemployment submitted on our Mortgage Payment Protection insurance policies. Claims incurred in the last nine months alone have exceeded all of the claims in the preceding five years… we have agreed that in order to ensure the future sustainability and viability of this cover for all insured members we regrettably need to increase the monthly cost of the cover. This is a situation that is being faced by all providers of mortgage payment protection insurance in Ireland.”

It said a policy premium increase of an average of €9 per month had been added to customers’ bills. However, some customers have found their increase is as much as €18 or 40%.

“We hope to avoid further increases but this will depend on the economic situation,” customers were told in the letters. “We are making the price increase in response to the rise in the national unemployment rate and also in anticipation that it might continue to rise in the near future.”

Furthermore, the company has lengthened from 30 to 60 days the period which must elapse from the start of a new policy before people can make a claim on it.

Earlier this year Cardif Pinnacle, which underwrites the redundancy insurance sold by members of the Professional Insurance Brokers Association, upped its premiums from €57 to €78 a month for monthly mortgage payments of €1,200.

 21 Oct 2009

The cost of a mortgage for first time buyers will have dropped by 50 per cent by December, compared to three years ago, according to a new forecast.

The quarterly EBS / DKM Affordability Index predicts that the cost of a mortgage for the average first time buyer working couple will fall to 13 per cent of their net income by December.

Three years ago, a first time buyer couple would have spent on average 26.4 per cent of their net monthly income on mortgage repayments for a new home.

The EBS/DKM Housing Affordability Index is a measure of the proportion of after tax income required to meet first year mortgage repayments for an average’ first-time buyer (FTB) working couple, each on average earnings with a 90 per cent mortgage. It takes into account changes in mortgage rates, changes in the level of mortgage interest relief, and is based on average earnings and average FTB new house prices nationally and in Dublin.

First time buyer mortgage repayments are expected to be 44 per cent lower by the end of the year compared to 2007, equivalent to €539 per month, according to the index.

By December, the projected net repayments for a first-time buyer working couple on a €165,000 mortgage will have fallen by €513 per month since July of last year on a national basis. The equivalent drop in Dublin will be €643 per month, or 41 per cent.

According to Dara Deering, director of membership business at EBS, while the overall number of national first time buyer’s transactions had fallen to 3,184 this year, there is evidence of an increase in activity in the market in recent months.

“The number of mortgage applications at the society has grown by 66 per cent over the past three months when compared with the first three months of the year. September was a particularly busy month with more than double the level of applications that we received in February. A significant portion of this activity is being driven by first time buyers who now account for 45 per cent of the house purchase market,” said Mr Deering.

“While there continues to be a lack of clarity about how far the market has yet to fall, the reality is that for many first time buyers, and indeed second-time buyers, the home that they want, in a location that is suitable for them is likely to be very competitively priced at the moment. The increased volume of applications, albeit in a declining market, indicates that growing numbers of people are considering taking advantage of the current levels of pricing at this time,” he added.

29 Oct 2009

IRISH banks continued to turn the screws on borrowers in the third quarter as they tightened lending conditions for mortgages and loans to businesses.

The five Irish banks who took part in the euro banking survey said they would leave the criteria for commercial lending unchanged for the last quarter.

As the banks tightened their lending policies, demand for credit fell further, the Bank Lending Survey (BLS), done on a quarterly basis, found.

Lending policy for non-mortgages over the period was left unchanged.

In the three months to end September demand for loans from households decreased across both categories examined during the third quarter of 2009.

Demand is expected to remain unchanged during the final quarter of 2009. The survey also found that for the Irish banks access to wholesale funding remained “challenging” during the quarter.

In its comments on the other eurozone banks the European Central Bank said “fewer” banks in Europe were setting tougher loan standards, implying that banks are becoming more willing to lend as the credit crisis eases.

Banks continued to tighten their policies on lending in the quarter but less than they did in the previous quarter, but the lifting of restrictions favours businesses more than consumers, the survey said.

That change “further confirms the indications of a turning point in the tightening trend observed at the time of the April 2009 survey,” the ECB said.

“At the same time, it needs to be kept in mind that the cumulated net tightening during the financial turmoil has not yet started to reverse itself and remains very substantial,” it added.

For the fourth quarter more banks are expected to loosen credit standards to businesses than to tighten them.

The degree of net tightening for business credit at 8% was the lowest since banks began toughening their terms two years ago when the financial crisis broke.

The survey did not signal the credit cycle had turned — a key factor for the ECB in deciding when to start tightening its generous liquidity supply and record low interest rates.

While the results are going in the right direction they did not signal the end of tough credit conditions in Europe, analysts said.

27 Aug 2009

ANALYSIS: IRISH LIFE & Permanent (IL&P) signalled that there was some light at the end of the tunnel when it said mortgage arrears and loan losses would peak this year, writes SIMON CARSWELL

Kevin Murphy, in his first results presentation since taking over as chief executive in June, said that arrears on mortgages doubled in the six months to June 2009, but that the pace of increase had fallen as job losses had slowed.

Mr Murphy’s second-in-command, finance director David McCarthy, said he expected arrears to peak at the end of this year, following the same trend for IL&P’s UK buy-to-let mortgages on which arrears have peaked.

While the group raised its long-term forecast for bad debts, the market responded positively, with IL&P’s stock climbing 2 per cent as the results showed there was an end in sight to loan losses.

“It’s positive in that it’s no worse than expected and the capital position looks pretty resilient,” said Sebastian Orsi at Merrion Capital. “The funding environment is improving, but it’s still tough.”

Permanent TSB’s decision to raise its standard variable rate by a half-point last month helped bring the bank’s interest margin above 0.9 per cent, up from 0.87 per cent in June, but still below 1.05 per cent last December.

The battle for deposits and wholesale funding remains costly.

The haemorrhaging of corporate deposits in the first quarter has not been covered by rising retail deposits, driving the key loans-to-deposits ratio above an alarming 300 per cent.

Mr Murphy said that IL&P had been making enquiries with the Government about whether inter-group deposits were covered by the State bank guarantee. If they are, the company may seek to put on deposit at Permanent TSB some of the cash pile of up to €2 billion that is held by Irish Life.

Mr McCarthy said that, as a standalone entity, Permanent TSB would have a core tier one capital ratio of 5 to 6 per cent, assuming that it bought back some bonds from investors at a discount.

This year will be tough for banking, Mr Murphy said, while the life business will be “subdued” and the investment market will not return to normal until 2010.

Some 6,122 of IL&P’s 188,000 mortgages are in arrears of 90 days or more. About 25,000 mortgages, worth in the region of €500 million, or 12 per cent of loans, are in negative equity where the loan is higher than the property’s value.

On its involvement in any restructuring of the sector, IL&P must play a waiting game. It will not be partaking in Nama because it has no development loans to sell to the State body.

Any restructuring that will take place, said Mr Murphy, will occur post-Nama in the latter half of 2010 after the loans with a book value of €90 billion are moved.

Only then will the size of the balance sheets of Irish Nationwide and EBS building society, potential partners of Permanent TSB, be known and how a larger banking group might be created.

In the meantime, IL&P will “look after itself”, according to Mr Murphy. It will continue to seek to grow its deposits and will, during the final quarter of the year, ask shareholders to approve the creation of a new holding company separating Permanent TSB and Irish Life.

Given the drag that the loss-making bank has been on the profitable life business, this will pave the way for a possible off-loading of Permanent TSB and the chance to park the bank in a larger group following the Nama purge of toxic assets across the banking sector.

This in turn will realise some long-awaited value for Irish Life.

20 Aug 2009

350,000: The number of unoccupied properties
Owners of residential investment properties and holiday homes have been warned they need to review their insurance cover after new figures showed that the number of unoccupied properties in the State has surged by 150pc.

When a house is unoccupied it is a greater insurance risk.

There are now some 350,000 unoccupied properties in the State, up from 140,000 in 2002, the Irish Brokers Association said.

Most of the unoccupied properties are private dwelling houses, followed by holiday homes and apartments.

Chief executive of the Irish Brokers Association Ciaran Phelan said the economic crisis had seen a huge increase in the number of unoccupied properties around the country and this was likely to continue to grow as the downturn worsens over the coming months.

He warned that some landlords could have an insurance claim turned down if the property is not occupied and they fail to tell their insurers.

If a property is not occupied there is a huge increase in the risk for the insurer, and is considered a material fact that needs to be disclosed.

Such information will impact the cover offered by the insurers, with certain restrictions placed on the cover depending on how long the property is likely to stay unoccupied.

“Most insurers will restrict cover to fire alone but will insist that all services are turned off, all combustible items are removed and that properties are regularly inspected,” he said.

“It is the insured’s responsibility to notify the insurer about any changes in occupancy and therefore we would encourage owners to contact their broker as soon as the property is vacated as this will have an impact on the insurance cover provided,” Mr Phelan said.