Which is the best lender to take out a mortgage with? - Discussion

"Ireland has raised €1 billion in 10-year borrowings this morning at a rate of just under 1 per cent. The auction was launched into turbulent markets but bond prices were strong this morning, which helped push down the cost of raising the funds."

Just to highlight the unfair rates being charged to SVR customers Padraic
 
My personal view is that its only a matter of time before a new entrant sees the advantages of coming into this market with a very competitive suite of rates and upsetting the current Cartel. All indications are that mortgage lending is one of the safest and most profitable lending options in the market. This of course is dependent on a diligent assessment process which the CB are now enforcing.
Current volatility in the banking sector is likely to mean that the bigger players are not going to make this move in the short/medium term but similar to the recent couple of new entrants there is likely to be a smaller player out there who can see the advantages of being a first mover in this area.
I have been present in some high level discussions (observer only) where it was touted to promote an offshoot mortgage provision based initially at low LTV/LTE bracket and moving forward from there.
 
44brendan said:
All indications are that mortgage lending is one of the safest and most profitable lending options in the market.
Click to expand...
Thats some statement given the world record level of mortgage arrears in this country v's the # of repossessions actually taking place
 
Delighted to hear that Brendan it wont be before time but of course it makes sense as the current situation cant continue and deep down our lenders know this. If BOSI arrived tomorrow all lenders would drop interest rates like stones and still make good profits. I also think that lenders will eventually realise that by having high home-loan rates they are in effect killing their own market in the broader economy (car loans etc) as it is affecting the economic performance of a wide spread of areas. However I believe the short term drive for profit outweighs the longer term thinking that should occur and was hoped for in two of the main culprits becoming "pillar banks". Its wrong and being allowed which is the frustrating part, I cant understand how the gov cant see through the short term mist and see the clearer picture. Padraic
 
Delboy said:
Thats some statement given the world record level of mortgage arrears in this country v's the # of repossessions actually taking place
Click to expand...
Predominately related to poor lending practices and lax supervision of the CB.
 
Delboy said:
Thats some statement given the world record level of mortgage arrears in this country v's the # of repossessions actually taking place
Click to expand...

Arrears are presumably far less likely on a <=3.5x income <80% ltv mortgage taken out today than a ridiculous >5x income 100% ltv mortgage taken out in 2006, though. If you look back at the "Mortgages and buying and selling houses" forum here, people were getting crazy loans during the bubble; it's really no surprise that so many are in arrears.
 
44brendan said:
I have been present in some high level discussions (observer only) where it was touted to promote an offshoot mortgage provision based initially at low LTV/LTE bracket and moving forward from there.
Click to expand...

This seems like a no-brainer to me. As there is no deterrent for those who choose not to pay their mortgage, high LTV lending is risky. But there is virtually no risk in 60% LTV lending especially if combined with 3 times LTI ratios. And don't forget that while most new mortgages are 90% LTV and 3.5 LTI , after a few years they meet the 60% LTV and 3 times LTI. So there is a market in the gap.

Brendan
 
The main obstacle for an entrant at this level is the size of the Irish market. I.e. This is effectively a niche market with limited scope to expand given the relatively small population. The exercise I mentioned earlier did not progress as the level of potential profitability was considered too low for a stand alone operation. A bank is unlikely to enter this market on a stand alone product offering (savings products being an exception). Cross sell and scope for expansion is a big issue in this type of decision and what would appear quite profitable to a smaller company would be deemed small to an international bank.
My own opinion is that pension funds must now be looking outside of the stock market bond type limitations towards other long term investments that can give both a reasonable level of return plus a relatively low level of risk. The recent announcement of a new entrant to the Irish mortgage market backed by pension funds is a positive indicator and when they are up and running they will surely see the advantages of offering more reasonable rates and challenging the dominance of the existing banks. Volatility in the stock markets could help accelerate this process.
Securitization and sale of parcels of "junk loans" in the US gave this process a bad name due to the fact that there was no reasonable level of due diligence applied to the loans sold. However the process of Securitisation is a good one and a very effective funding tool to avoid liquidity being tied up in a long term product. Its' only a matter of time before we see trust returning to this market and sound mortgage lending been accepted as the low risk product that it once was!!
 
One wonders how good an opportunity it really is. A mortgage book of €500m would be ambitious for a brand new entrant without the distribution network of the current players. BOI were trumpeting their 2% net interest margin on new loans which I understand is not sustainable in the context of mortgage lending. A net interest margin of 1.5% would create revenue of €7.5m per annum from which you have to run the business (e.g. pay staff, pay brokers, pay the Central Bank, have Compliance and Arrears Departments). Plus it's nigh on impossible to repossess a family home. There are easier ways to make money, and the above numbers (notwithstanding their incremental nature) would hardly excite the Santanders of this world.
 
Update: Received a letter from AIB saying they will no longer be charging me Current account fees as my mortgage is drawn from it.
 
Just got approved with AIB at 3.55% on LTV Variable >50%<=80% rate but for me the KBC rate is a lot better 3.30%. From what I am reading that KBC customer services is unsatisfactory but over the 30 years the saving should out way the negatives. I am thinking the variable rates not going to change over the year or so it would sense to stay on the variable rate compared to the fixed as it a little better.
 
You must log in or register to reply here.
Menu
Log in
Register