06 Apr 2010

AIB has made it harder for first-time buyers to get a mortgage by withdrawing a number of discounted home loans aimed at new buyers, mortgage brokers claimed yesterday.

But the bank hit back, saying it is committed to the first-time buyer market. In the past few days, Allied Irish Banks has withdrawn a special low rate of 2.4pc that was aimed at first-timers. This was a one-year fixed-rate deal.

Under it, new buyers were able to borrow up to 92pc of the value of the property.

However, the best new buyer rate has shot up to 3.09pc, according to director of the Irish Mortgage Corporation, Frank Conway.

He said the new higher rate meant that the hardest hit of all the AIB customers by the new charges introduced last week were first-time buyers, as their rate had gone up by 0.69 percentage points, while existing borrowers were hit by, at most, a rise of 0.5 percentage points.

“The latest move by AIB is a disappointment as it means that the cost of borrowing for first-time buyers has been increased the most when compared to other sectors of the market.

“For example, the repayment on a €200,000 mortgage over a 30-year term increases from €779 (based on the 2.4pc rate) to €852 (based on the new 3.09pc rate) — a rise of €73 a month for new customers.”

Mr Conway, whose company has just started a recruitment drive for 10 new financial advisers, accused the bank of shifting away from first-time buyers.

But this was rejected by an AIB spokesman, who said: “AIB remains committed to supporting the mortgage market, in particular first-time buyers.

“Any suggestion to the contrary is not borne out by the numbers.”

The bank said its share of the first-time buyer market had increased dramatically.

Funding

In 2009, AIB accounted for one in every three of first-time mortgages, but it is now writing 40pc of all new property transaction business in the country.

“Unfortunately, we have had to increase rates due to the high cost of funding we are experiencing,” the bank said.

However, Michael Dowling, of the Irish Mortgage Advisers Federation, pointed out that AIB changed the way it calculated what a first-time buyer could borrow, meaning most would qualify for a smaller mortgages.

Mr Dowling said someone on a salary of €29,000 would previously have qualified for a mortgage of €165,000, but would only be sanctioned for €130,000 from now on. This is almost 20pc less.

18 Jan 2010

CONSUMERS will no longer be able to “cherry pick” lower mortgages rates, a top financial expert said today.
Oliver Gilvarry of Dolmen stockbrokers said lending institutions are to “move at pretty much the same time” when applying expected mortgage rate hikes.
“So the ability to cherry pick to a lower mortgage rate won’t be there at all,” he added.
Mr Gilvarry pointed out that many borrowers never even received the full benefit of the interest rate reductions from the European Central Bank (ECB).
“We can see with the foreign-owned banks here that have been operating mortgages — a number of them never passed on a lot of the rate cuts that were given through from the ECB last year, so you don’t have that option either,” he said.
It emerged today that almost 70,000 Permanent TSB mortgage customers face a rate hike of as much as 0.5pc over the coming weeks — adding €15 a month to average monthly repayments.
The bank already added 0.5pc to its standard variable rate last July, bringing it to 3.19pc.
Other banks, including AIB and Bank of Ireland, were thought to have been preparing to hike their rates at the time but held back following criticism of Permanent TSB.
Kevin Murphy, head of the bank’s parent group, Irish Life & Permanent, indicated last November that the lender would be looking at its interest rates again in January.
It is believed the hike is now on the verge of being implemented.
The bank’s remaining 120,000 home borrowers, who have either fixed-rate or tracker mortgages, which move in line with ECB rates, will not be affected by the move.
Earlier this month, Karl Deeter of Irish Mortgage Brokers warned lenders will push up standard variable rates by as much as 1pc this year, and another 0.5pc next year.

17 Dec 2009

The Federal Reserve repeated its pledge to keep interest rates “exceptionally low” for “an extended period” and said the economy is strengthening. “Household spending appears to be expanding at a moderate rate, though it remains constrained by a weak labour market, modest income growth, lower housing wealth, and tight credit,” it said.

After cutting interest rates less than expected at the last meeting, the European Central Bank’s leading members appear to be giving a clear signal over what the bank should do next.

In the latest interview, the governor of the Austrian central bank Ewald Nowotny said that the key interest rate should not go below the 1% level. This statement backs what other key ECB members have said over the past few weeks. Among them, the Vice-President of the European Central Bank said that the key interest rate could move somewhat lower, but in a “measured way”. Additionally, Axel Weber, which leads the Bundesbank, said that 1% is his personal bottom line.

Putting the pieces together, it appears that the ECB does not want to cut below 1%, even though the bank adopted a number of quantitative policy measures. “Despite having a much higher interest rate than the Fed, the money market rates in Europe are lower then in the U.S., and this gives the ECB more space to maneuver.” TheLFB-Forex.com Trade Team added.

“If the ECB decides not go any lower than 1% and MR. Trichet or any other of the voting members makes this official, the euro may find very strong support.” TheLFB-Forex.com Trade Team added. “The single currency might strengthen not only against the dollar, but against a whole range of currencies, especially against the pound” they said. “However, this would also have a side-effect, since the euro will gain ground against the Eastern European currencies, which are ready to sink in a pool of foreign denominated debt.”

TheLFB-Forex.com Trade Team notes “Since every other major central bank reached the lower limit of the monetary policy, the ECB policy measures are more important than ever for the euro’s valuation.” Keep an eye on what the ECB members are saying, you never know when the euro might take off”.

Monday, 30 March 2009

Interest rates set to hit 1pc under new ECB cuts

23 Mar 2009

INTEREST rates look set for another fall next month - perhaps to 1pc - after the chief of the German central bank said the ECB was prepared to cut again.

18 Mar 2009

Irish Independent

European Central Bank President Jean-Claude Trichet said policy makers haven’t decided whether to stop cutting interest rates below the current record low of 1.5 percent.