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Mortgage lending hits a 6 year high

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Mortgage lending has hit a 6 year high as €5.6bn was drawn down by 30,000 people.

In the last three months of 2016, more than 9,000 mortgages were drawn down. This is the highest number since 2010.

Economists are now expecting a “bumper” level of mortgage activity this year because of the easing of Central Bank lending rules and the help-to-buy scheme.

The total number of mortgages taken last year was 29,498.

New buyers and mover-purchasers accounted for 84pc of the total value of mortgages drawn down, with the rest made up mainly of investors.

The level of mortgage switching continues to increase, but it is coming off a very low base.

Help to Buy- Budget 2017

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A new scheme is being introduced to provide a rebate of income tax paid (but not USC or PRSI) over the previous 4 years for first time buyers buying a newly built principal private residence or equivalent self build, on or after 19th July 2016. The rebate will be 5% of the purchase price of the property up to €400,000, i.e. a maximum rebate of €20,000 per property (not per joint buyer) assuming the buyer(s) have paid at least €20,000 income tax over the previous four year period.

The rebate only applies where the mortgage is at least 80% of the home value.

Those who will NOT qualify for the rebate include:

• First time buyers who signed a contract to buy a new home before 19th July 2016;

• First time buyers with an LTV less than 80%;

• First time buyers buying a home valued at more than €600,000;

• Non first time buyers; and a joint purchase between a first time buyer and non first time buyer; both purchasers must be first time buyers

The rebate scheme is scheduled to run to end of 2019.

 

 

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

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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.

Central Bank told to change lending rules

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Fianna Fail and Labour call for deposit cuts for first-time buyers struggling to get on ladder.

First-time buyers are being frozen out of the housing market due to high rents coupled with the massive mortgage down payments they are forced to save due to the Central Bank rules.

Young families hoping to trade-up are also being crippled by the lending conditions which mean they have to save a huge 20pc deposit on any home they hope to buy.

Fianna Fail is calling for the rate for first-time buyers to be slashed by a third if the house-buyer has a proven track record of paying rent for three years.

The party’s submission, which was prepared by Fianna Fail finance spokesman Michael McGrath, also calls for new laws which will force banks to take out insurance against losses arising from borrowers defaulting, or entering into a mortgage arrears resolution process.

The cost would be shared between the borrower and lender – the bank would add an interest rate to the loan to cover the insurance.

Homeowners warned about paying too much for house insurance

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The Society of Chartered Surveyors (SCSI) has warned that homeowners may be overpaying for house insurance. It says they are paying for more cover than they can claim in the event that they need to rebuild their home– and overpaying on their insurance premium as a result.

The most common mistake homeowners made was to confuse the market value of a property with its rebuild cost. For example, the average three bed semidetached 95sq m (1,023sq.ft) house in Donegal is €85,000, but the rebuilding cost based on the SCSI house rebuilding guide is €117,000.

In contrast, a similar property in Dublin could sell for €350,00, but has a rebuild cost of €181,000.

Having the correct reinstatement value will not only make certain that you are not over- or underinsuring your property but will also avoid overpayment when it comes to your home insurance premium.

‘Flaws’ in system that denies homes flood insurance

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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

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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

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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.

Savings overhaul for first time buyers.

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The Government wants to overhaul a tax relief scheme for first-time buyers which has been labelled a “flop” by Fianna Fáil.

First-time buyers can apply for a refund on the Deposit Interest Retention Tax (DIRT) levied on savings to build up a deposit to buy a home. The scheme was due to run until the end of 2017, but its take-up has been poor.

Figures released in July showed that fewer than 50 refunds were issued since the scheme was introduced.

Finance officials are examining ways to make the scheme more attractive, as concern grows about a lack of initiatives for first-time buyers.

“We need to make the scheme more appealing,” said a Government source.

Fianna Fáil finance spokesperson Michael McGrath said the low take-up shows the scheme does not work.

How you can avoid lender rip-offs

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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.