cbpa.ie

The EBS building society has announced its intention to increase its standard variable rate (SVR) mortgage by a quarter of a percentage point from the beginning of August.

The building society’s rate will climb from 4.43 per cent to 4.68 per cent.

While such a move would cost someone with an average mortgage of €300,000 nearly €40 a month, the consequences for most of the society’s mortgage holders are likely to be a lot less severe as most of its customers are on tracker mortgages, and will not be affected by the move.

EBS said the average size of mortgages held by its customers with SVRs was €90,000, so the move will add just €12 per month to the cost of servicing such a loan.

It is the second time this year the EBS has increased its mortgage rate, which went up by 0.6 per cent in February. It said it had no option but to increase the cost of borrowing to some of its mortgage holders, as the costs of acquiring funds remained high.

The move is not entirely unexpected, as the European Central Bank has repeatedly signalled the euro zone is entering what will be a sustained cycle of interest rate hikes, and Irish financial institutions are continuing to lose money on tracker mortgages issued at the height of the boom.

In April, the ECB raised its key lending rate by a quarter of a percentage point to 1.25 per cent. It was its first increase in more than two years. At least one further rate increase is likely before the end of the year.

source: irishtimes.com

10 Nov 2009 

Two out of three banks are declining mortgage applications making it increasing difficult to secure home loans.

Paul Kinnane, deputy president of the Irish Brokers Association said that most mortgage lenders are claiming they are open for business but in his experience they are declining applications because of applicants income or the loan-to-value ratio.

“With the banks taking such a cautious view on property values, it is extremely difficult for anyone trying to buy,” he said.

Mr Kinnane said lenders that are active will only accept certain applicants adding that it’s imperative prospective homebuyers “knock the door of every lender”.

Director of the Irish Mortgage Corporation, Frank Conway said banking is still in a state of flux and said there is a share of activity but in reality, the problems continues to be consumer hesitancy to enter the market.

He said that the take-up on approved mortgage applications is “very low”.

“I think many prospective buyers are simply waiting out until the market begins to improve again,” he said.

He said there are three categories of players in the market at the moment: players, substitutes and spectators.

“The players are those who are on the pitch and approving mortgages up to 92% loan to value, those are Bank of Ireland/ICS, AIB and EBS,” he said.

“In the substitute category, they are at the game and nearly ready to play, those lenders are approving mortgages up to 90% loan-to-value.

“In the final category, we have those spectators in the stands, watching the game. They require 20% deposits and lend up to 80% loan-to-value,” he added.

11 Nov 2009

LESS THAN a tenth of applications by banks and building societies to repossess homes from borrowers in default on mortgages lead to repossessions, the Irish Banking Federation (IBF) has told an Oireachtas committee.

Court applications by lenders to repossess homes ran “into the hundreds” but between 7 and 9 per cent ended up in repossessions, IBF spokesman Felix O’Regan told the Oireachtas Committee on Economic and Regulatory Affairs.

Most cases are taken by subprime lenders which are not members of the IBF, said Mr O’Regan.

The bank representative group attended the committee after unveiling “a statement of intent” by 10 banks and building societies under which they agreed to wait at least six months before seeking to repossess homes of borrowers who fell behind on mortgage repayments through the courts.

Pat Farrell, chief executive of the IBF, said there had been just 21 repossessions out of hundreds of thousands of mortgages in the first half of this year. A further 49 properties were voluntary relinquished or abandoned by borrowers. Mr Farrell said a level of forbearance had been shown to mortgage holders by banks that did not exist in the UK. Repossessions accounted for one in every 10,000 mortgages in Ireland compared with 35 in the UK, he said. He added that the statement agreed by 10 lenders was further assurance that if borrowers found themselves in difficulty, they could receive a grace period of at least six months if they engage with their lender.

“I am confident that the vast amount of homeowners will be able to come with a satisfactory arrangement with their lender – the figures bear it out,” Mr Farrell told the committee.

Under the agreement, the lenders will wait six months from the time the loan falls into arrears before taking legal action. Lenders must adopt flexible procedures for handling mortgage arrears and assist the borrower by deferring payments, extending the term of the mortgage or capitalising arrears and interest.

The application of the plan will be monitored by an IBF oversight committee with the Money Advice and Budgeting Service (Mabs).

AIB and Bank of Ireland have agreed to wait 12 months under the terms of their €7 billion State recapitalisation by the Government last February.

The other banks agreeing to a six-month moratorium are ACC Bank, Ulster Bank, Bank of Scotland (Ireland), National Irish Bank and KBC Bank Ireland. Three guaranteed lenders – Permanent TSB, EBS building society and Irish Nationwide Building Society – have also signed up to the plan.

Fine Gael TD Kieran O’Donnell and Labour TD Sean Sherlock, members of the committee, called for the statement to be put on a statutory basis.