USE­FUL RE­SOURCES

Sunday Independent (Ireland) - Business & Appointments - - FRONT PAGE -

IF you’re shop­ping for a new mort­gage, whether as a first-time buyer, a trader-up­per or a switcher, it’s bound to be a lit­tle an­noy­ing to know that you’ll be pay­ing over the odds com­pared to your coun­ter­parts in the rest of Eu­rope — even if you get the best pos­si­ble deal. Re­cent fig­ures from the Cen­tral Bank show that a typ­i­cal new bor­rower is pay­ing al­most €157 a month more for their mort­gage com­pared with the eu­ro­zone av­er­age.

The av­er­age in­ter­est rate is­sued on a new mort­gage in Au­gust was 3.15pc. Although low for Ire­land by his­tor­i­cal stan­dards, this com­pares with an av­er­age rate of just 1.77pc across Eu­rope.

The ex­pla­na­tions prof­fered as to why we are forced to pay such sky-high rates range from the re­luc­tance of banks to re­pos­sess prop­er­ties, to the high num­ber of non-per­form­ing loans, to AIB and Boi’s stran­gle­hold on the mar­ket.

The good news for bor­row­ers is that ECB rates look set to stay low well into 2019 thanks to un­der-per­form­ing economies of coun­tries in the eu­ro­zone, to which you can add the risk of a British re­ces­sion if Brexit turns into a no-deal re­al­ity. The ECB had sig­nalled Septem­ber next year as the likely start of rate in­creases, but the lat­est data now casts doubt on its plan to start rais­ing rates above its cur­rent su­per-low lev­els.

More good news may come dur­ing 2019 if An Post’s much-touted move to en­ter the mort­gage mar­ket suc­ceeds.

At the mo­ment, if you are look­ing for an 80pc mort­gage on a prop­erty worth €300,000 over 25 years, AIB of­fers the low­est rate at 2.95pc, fol­lowed by KBC at 3.05pc, Ul­ster Bank at 3.2pc, EBS and Per­ma­nent TSB at 3.5pc.

If you are look­ing at fixed rates, which are a pop­u­lar choice at the mo­ment, Ul­ster Bank is do­ing a two-year fixed rate of 2.3pc, with KBC close be­hind on 2.55pc. A five-year fixed rate is also avail­able at 2.5pc from Ul­ster Bank, with KBC — again — closely be­hind at 2.65pc.

The res­i­den­tial mort­gage mar­ket is pretty much sown up by five play­ers, led by AIB (in­clud­ing EBS) with a 33pc share, while the Bank of Ire­land is close be­hind at 28pc, ac­cord­ing to Cen­tral Bank fig­ures. The re­main­der is more or less split be­tween Per­ma­nent TSB, Ul­ster Bank and KBC.

There is a tier be­low them of very small play­ers in­clud­ing Fi­nance Ire­land, a firm run by ex-per­ma­nent TSB boss Billy Kane that re­cently bought Pep­per Money’s mort­gage port­fo­lio, and Dilosk, an­other Ir­ish op­er­a­tion that spe­cialises in loans for buy-to-let bor­row­ers, but which in­tends to of­fer owne­roc­cu­pier mort­gages un­der the ICS brand in the first half of 2019. It bought ICS’S mort­gage book in 2014.

“Re­cently we saw Fi­nance Ire­land en­ter the mar­ket by tak­ing over Pep­per Money’s mort­gage book, which they’re aim­ing to grow,” said Daragh Cas­sidy of price com­par­i­son site Bonkers.ie. “How­ever they’ve stated that they’re not seek­ing to un­der­cut any of the low­est in­ter­est rates cur­rently on of­fer, but in­stead will of­fer rates that are some­where be­tween the high­est and low­est cur­rently avail­able.

“So whether the mar­ket re­ally gets shaken up de­pends on who de­cides to en­ter. If it’s a big, strong, for­eign player then things could change dra­mat­i­cally in the same way things changed when Hal­i­fax/bank of Scot­land Ire­land made its ill-fated en­try into the Ir­ish mar­ket in 1999. If it’s a smaller player, then maybe not.” but a re­cent re­port by the Cen­tral Bank was crit­i­cal of how they were run. How­ever, re­cent ef­forts to im­prove mort­gage prod­uct of­fer­ings has prompted the reg­u­la­tor to pro­pose re­lax­ing its mort­gage lend­ing cap on credit unions.

The Ir­ish League of Credit Unions has de­vel­oped a new stan­dard­ised home loan prod­uct called ‘Cuhome’ that aims to over­come the Cen­tral Bank crit­i­cisms. The as­so­ci­a­tion has part­nered with Link ASI, a third-party con­trac­tor who will un­der­write the ser­vice and pro­vide le­gal ser­vices, soft­ware and credit as­sess­ments, although the fi­nal loan de­ci­sions will still be made by the lo­cal credit union.

In ad­di­tion, credit unions af­fil­i­ated to the Credit Union De­vel­op­ment As­so­ci­a­tion (CUDA) have ac­cess to a new mort­gage frame­work. “Since CUDA launched its mort­gage so­lu­tion, al­most €43m in mort­gage lend­ing has been pro­cessed - over 400 mort­gages - and vol­umes are grow­ing as an in­creas­ing num­ber of credit unions sign-up,” said Kevin John­ston, CEO of CUDA.

How­ever, while rates may vary, the av­er­age rate on the Cuhome mort­gages will be a vari­able 4pc, which is con­sid­ered high com­pared with other rates in the mar­ket.

But for at least some buy­ers, it’s not al­ways about the low­est rate. Cas­sidy of Bonkers. ie be­lieves that credit union mort­gages could shake things up not nec­es­sar­ily by re­duc­ing in­ter­est rates but by chang­ing the way the mort­gage ap­pli­ca­tion process works.

“Credit Unions con­stantly re­ceive some of the high­est cus­tomer and brand sat­is­fac­tion scores out of all busi­nesses in the coun­try mainly be­cause peo­ple find them ap­proach­able, flex­i­ble and on their side,” he said.

“The same couldn’t re­ally be said for the banks. So the credit unions could shake up the mort­gage ap­pli­ca­tion process to the Ac­cred­ited price com­par­i­son web­site that in­cludes search­able in­for­ma­tion on the best mort­gage deals. Web­site of the Com­pe­ti­tion and Con­sumer Pro­tec­tion Com­mis­sion, which in­cludes price com­par­isons of the best mort­gage deals. Web­site of the Ir­ish League of Credit Unions, which is rolling out a new cen­tralised mort­gage prod­uct for par­tic­i­pat­ing credit unions. In­for­ma­tion web­site on the Re­build­ing Ire­land Home Loan, avail­able through lo­cal au­thor­i­ties. ben­e­fit of ev­ery­one by mak­ing it eas­ier and less stress­ful.”

There’s also the Re­build­ing Ire­land home loan, a Gov­ern­ment-backed prod­uct now avail­able through lo­cal au­thor­i­ties. Avail­able to first-time buy­ers with in­comes of up to €50,000 for an in­di­vid­ual or up to €75,000 for a cou­ple, ap­pli­cants can bor­row up to 90pc of the mar­ket value of a new, sec­ond-hand or self­built prop­erty at fixed rates start­ing at 2pc or a vari­able rate of 2.3pc.

There are max­i­mum prop­erty value lim­its, how­ever. You can only buy prop­erty up to a value of €320,000 in coun­ties Cork, Dublin, Kil­dare, Gal­way, Louth, Meath and Wick­low, and up to €250,000 ev­ery­where else.

But don’t put off mort­gage shop­ping in the hope that more lenders en­ter the mar­ket.

“Get­ting a bank up and run­ning takes time and through no fault of any new en­trant, th­ese things of­ten get de­layed for a va­ri­ety of rea­sons so, in re­al­ity, you could be look­ing at years be­fore ev­ery­thing is in play,” said Joey Shea­han of My­mort­gages.ie. “Dur­ing which time a po­ten­tial mort­gage holder or some­one look­ing to make a switch could be se­cur­ing a home-loan with an­other lender at a good rate.”

“There is com­pe­ti­tion in the mar­ket as it stands and there’s a greater de­gree of choice around in­ter­est rates than there was 24 or even 12 months ago. So peo­ple have op­tions. For ex­am­ple, bor­row­ers with an LTV of less than 60pc can cur­rently lock in a rate for 10 years at 3.05pc — this rate may not be avail­able next year if the Eu­ro­pean Cen­tral Bank rate in­creases.”

Cas­sidy adds that if some­one waits a year or two for a bet­ter rate, they’ll still have to pay rent un­less they’re liv­ing at home, which could negate a lot of the sav­ings. “Also, if some­one buys now and then finds a new bank with a far cheaper rate en­ters the mar­ket later, there’s noth­ing to stop them from look­ing to switch to the bet­ter rate at that stage.”

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