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Surge in mortgage approvals looks set to fuel house price increases

The number of people approved for a mortgage surged by a third last month, driven largely by first-time buyers.

Potential buyers are getting approved for higher amounts of borrowings, according to the figures from the Banking and Payments Federation. The figures imply property prices will keep rising.

A total of 4,124 want-to-be buyers got approval during May. In the same month last year there were 3,046 approvals, which means the total was up 34.5pc in a year.The approvals in May were valued at €884m in total. The average purchase approval in May was €228,505, up 7.7pc year-on-year.

The rise in the numbers getting the go-ahead for home loans comes as the Government has committed to reviewing the help-to-buy scheme.

Good news for mortgage holders: ECB rate hike ‘years off’

There is unlikely to be a rise in European Central Bank interest rates for the coming years, a development that will be a huge boost to thousands of mortgage holders.

Trackers are pegged to the ECB lending rate, and cannot be increased unless the ECB raises its main rate.

It could be three to four years before interest rates rise.

It is estimated that about 350,000 mortgage holders are now on tracker rates, with about 300,000 on variable rates.

All you need to know about the rule change for first-time buyers

The Central Bank has made a dramatic change to its mortgage lending rules for first-time buyers.

However, there are also fears that the loosening of the lending limits will lead to even higher property price rises.

First-time buyers will now be able to borrow with a deposit of 10pc, if they meet other lending criteria.

Up to now, new borrowers could have been approved for a mortgage with a deposit of 10pc for borrowings up to €220,000 and a 20pc deposit for all amounts over that. The changes will take effect from 1st January 2017.

At the moment, a first-time buyer purchasing a home for €300,000 needs a deposit of €38,000.

From next year, the new buyer should qualify for mortgage approval with a deposit of €30,000.

This will give the buyer an extra €8,000.

And if the buyer qualifies for the Government’s Help-to-Buy scheme for new homes, they will get a tax rebate of €15,000.

This means they will be able to buy with an effective deposit of 95pc of the property’s value.

Surge in approvals for home loans – but few are likely to buy

There has been a surge in the number of people getting approval for a mortgage, but many of these people being approved for a home loan are competing hard with each other for the few houses that are available and are unlikely to end up drawing down the mortgage, experts have said.

In August, close to 3,000 people received mortgage approval to buy a home – a rise of 37pc on the same month last year. However, the number of homes listed for sale on MyHome.ie was close to a historic low – at 23,500 in June this year. Put simply, the lack of housing construction means that greater numbers of potential buyers are focusing on a smaller pool of homes listed for sale.

‘Flaws’ in system that denies homes flood insurance

The Central Bank needs to carry out an investigation into how insurance companies decide homes are at risk of flooding, a new report has recommended.

A committee of TDs and senators has found evidence that insurance firms are using flood prediction maps to avoid providing cover for properties at the remotest risk.

The Oireachtas Committee on Environment found there are flaws in the geo-coding of areas for flood risk that prevent homeowners getting insurance.

Social Democrat TD Catherine Murphy said she knows of situations where houses on hills are refused cover because they are considered to be in a flood-risk area.

“Today there are people in the position that their homes were never flooded but they can’t get insurance,” she said.

“There is a big issue with the insurance company taking advantage of the flood mapping and actually avoiding even the remotest risk,” she added.

The committee’s 156-page report, entitled ‘Flooding and Property Insurance in Ireland’, comes in the wake of the devastation wreaked by Storm Desmond across the country last week.

The report says the flood insurance issue needs a “systematic investigation” by the Central Bank to determine its extent and advise on appropriate measures.Labour TD Michael McCarthy said: “It’s not logical and neither is it fair or moral that people in areas that aren’t affected by flooding can’t get insurance.

“If the evidence proves that insurance companies aren’t stepping up to the plate, then Government will have to resort to measures that will put that right.”

However, he said that the committee did not see fit to endorse a levy on all home insurance to subsidise cover for those in high-risk areas.

The committee heard from organisations representing those who have been excluded from flood cover, or who are at risk of being excluded, that their homes are no longer mortgage-able and the value of their homes plummets.

The report also recommends that the Government give consideration to a ban on future building on flood plains and in low-lying coastal areas.

Campaign wants 20,000 to switch mortgages

A massive campaign to get 20,000 variable-rate mortgage holders to switch to another provider is to be launched.

The One Big Switch group aims to do a deal with a bank for lower mortgage rates in return for delivering thousands of switchers to it.

The group has already negotiated deals with electricity providers and health insurers for those who sign up with it. It has a database of some 80,000 registered consumers.

There are around 370,000 people on variable rates in this country, with customers paying some of the highest interest rates in the eurozone.

It is estimated that switching to the best-value mortgage could see a family with a €250,000 home-loan saving around €1,500 a year.

“If 20,000 people are prepared to switch together it will unlock the buying power for a group discount,” Lachlan Harris of the One Big Switch campaign said.

Once the group has thousands of mortgage holders who register for the mortgage campaign, One Big Switch will then negotiate with the banks for an exclusive group discount.

Property prices still rising despite Central Bank’s lending curbs

Property prices continue to rise at more than 1pc per month, despite the lending measures introduced by the Central Bank to cool the market.

Figures released by the Central Statistics Office (CSO) show national price hikes of 8.9pc year on year – and 1.3pc in September.

Meanwhile, in Dublin, residential prices rose by almost 1pc (0.9pc) – up 6.5pc on September last year.

The latest month’s data is comparable to the 1pc-plus increases during the boom years.

More worryingly, Dublin house prices (not including apartments), which the Central Bank measures were designed to cool, rose 1.1pc in September.

However, national residential prices are still now 34.6pc lower than at their peak level in 2007, while Dublin prices remain 33.7pc lower.

It has been noted that the increases, particularly in Dublin, were a sign that bank lending restrictions in the absence of supply increases were not working.

Noonan refuses to demand mortgage rate cuts by banks

Finance Minister Michael Noonan has said he believes the country’s main banks will slash their high variable rates if their customer bases come under “threat” from new competitors.

Senior bank executives told Mr Noonan last week that they had put in place a series of “options” for borrowers, which would allow them to reduce their monthly payments.

These include fixed rates that are lower than variable rates.

Mr Noonan has urged mortgage holders to contact their banks and switch provider “if the offer is not satisfactory”.

But he is understood to have refused to request banks to slash their rates.

The minister is instead banking on the prospect of them doing so voluntarily as a result of increased competition.

“Competition is the best long-term way of reducing interest rates paid by Irish borrowers and ensuring that Irish banks offer a sustainable product range,” Mr Noonan said in response to a parliamentary question by Mayo Fine Gael deputy Michelle Mulherin.

How you can avoid lender rip-offs

The chances of getting a bad deal, or even being ripped off, are huge for both new buyers and those switching mortgage providers.

Here are some of the issues to consider, whether it is your first mortgage or you are opting for a new lender by moving your mortgage.

Be wary of cash deals.

Some banks are offering cash-back deals for new buyers and switchers.

This “cash-in-the-hand” offer is proving very attractive. It can represent up to €2,000 on every €100,000 borrowed.

But you will get lower mortgage rates from the likes of AIB, EBS and HAVEN. This means that typically after just eight years, you would be better off at one of these.

Fixed or variable

Many banks have refused to reduce their variable rates, despite demands from Finance Minister Michael Noonan. They have instead offered attractive fixed rates. But be aware that you are locked in with a fixed rate, for the period of the deal.

Some mortgage experts think variable rates may fall again.

Banks’ history of care

Before opting for a particular bank, ask yourself how good is that lender’s customer care.

Cost is not the only consideration. Standards of service are also important. Has the bank a history of overcharging, and how does it deal with those in mortgage difficulty?

Mortgage protection

Lenders will insist that you take out mortgage protection insurance, a type of life insurance policy that pays off your mortgage if you die before the end of the term.

Your lender will often offer to sell you a policy, but you don’t have to buy it from them and, indeed, it can be much cheaper to buy elsewhere. Talk to a mortgage broker who may be able to offer more choice.

Term of mortgage

The longer the term of your mortgage, the cheaper the monthly repayments will be. However, stretching out the term means you end up paying more in interest over the life of the loan.

Consider moving your current account

Both AIB and KBC offer interest rate discounts to new buyers and switchers prepared to pay for their mortgage through the banks’ current accounts. This could make these lenders worth considering.

How are existing mortgage holders being treated?

When taking out a mortgage with a bank, make sure that lender is passing on any rate reductions to existing customers.

KBC Current Mortgage Offers

KBC  is offering attractive mortgage deals for customers who are looking to buy their first home, subsequent home, or those simply looking to switch for better value.

  • Rates from as low as 3.30% fixed and 3.25% variable when you open a KBC current account.
  • 50% off KBC Home Insurance for 1 year for new residential mortgages that draw down up to 31st December 2015.
  • Clients who wish to switch to KBC before 31st December 2015 get €2,000 towards legal fees.

Terms and conditions apply.

Contact us to discuss on 01-5052718.