Mortgage Rates Ireland

THE GOVERNMENT may introduce new restrictions on payments made under the mortgage interest supplement schemes to save money.

Minister for Social and Family Affairs Mary Hanafin said yesterday she would publish a review of the mortgage scheme before Easter following a four-fold increase in the number of people receiving the emergency payment.

The number of people receiving mortgage interest supplement at the end of December 2009 was 15,100, compared with 4,000 at the end of 2008. The scheme cost the exchequer €60 million in 2009 and this figure is expected to rise as the number of homeowners losing their jobs is forecast to increase this year.

The scheme operates to provide financial support to people who are unable to meet their mortgage repayments due to a change in circumstances, such as loss of a job.

It is designed to be a short-term payment covering the interest portion of a home loan.

Ms Hanafin said she was considering making homeowners who get into trouble with their repayments go to their bank or financial institution to agree a repayment deal before becoming eligible to make an application for any mortgage supplement payments.

She said we are probably the only government paying out that amount of interest for people and the first port of call probably should be the bank or if they are not able to do that then the Monetary Advice and Budget Service should be asked to act on their behalf with the bank.

Ms Hanafin said the €60 million paid out under the scheme was “dead money” because banks had no incentive to renegotiate terms with clients when they got the relief.

She said her department was looking at whether this money could be used in a better way while still ensuring that people’s homes were protected from repossession.

The Government’s review may also remove the current 30-hour work limit and replace it with a means test.

The ECB today kept the interest rate at 1% as expected. Here in Ireland - for people not on tracker mortgages that might not be as good as it sounds. Variable rate mortgages did drop broadly in line with ECb rates in 2008/2009 - but there is no guarantee that variable rate mortgages (not ECB trackers) will stay low. PTSB has raised mortgage rates this week - and there are rumours that others will follow.

Well - the rumours were right and PTSB have today confirmed an increase to their standard variable rate from February 1st 2010. The rate will rise 5 percentage points from 3.19 to 3.69%.

See some of the better mortgage rates available from PTSB’s competitors - but will these low rates be around for much longer?

With the Irish Independent putting out headlines like “Mortgage Hike Shock” - some people may be thinking of moving their mortgage to another lender - especially PTSB mortgage holders.
If PTSB do raise their variable rate by 0.5% as predicted - they say the “average” rise in repayments for PTSB variable rate mortgage holders will only be €15 a month - because the avergage outstanding mortgage is just €62,000.
The mortgage broker industry is urging people to go on to a fixed rate mortgage - but of course they may be slightly influenced by the possibility of increased work for themselves if people switch lenders.
Switching your mortgage lender will involve legal fees and valuation fees of anything between €600 and €1500 - depending on the solicitor you use. The legal work involved is not as much as buying a house - but it still has to be done properly.
If you still owe more than 90% of the value of your house - it is unlikely that any lender will want to take on your mortgage .
Switching to another lender’s variable rate is probably not worth the costs involved because other lenders may well put up rates soon too.
Switching to a fixed rate will save you money if it is lower than your variable rate. Switching to a fixed rate that is higher than your current rate is more of a gamble and it may or may not pay off. There are still fixed rates on offer as low as 2.8% (AIB) and 2.99% (BOI) for switchers. But these rates are only for 2 years - and the savings you make may not even cover the legal fees if your mortgage is not very large.
See the Lowest Mortgage Rates here.

For example a 250k loan over 25 years at 3.69% would mean repayments of €1278 a month. Switching to a 2 year fixed rate of 2.99% would reduce the repayments to €1185 - a saving of just €93 a month. (If variable rates rise again during the 2 years your savings would of course be greater.) So you would save a minimum of €2232 over the 2 years on repayments - but the switching costs could use up around €1000 of this. It is worth considering though.

A 100k mortgage would mean reductions in repayments of just €37 a month (€888 total) - so it may not be worth switching lenders for those type of savings - unless just as a protest.

Of course - variable rates could come down during the next 2 years - but that is not looking likely in the short to medium term.

NB: Bank of Ireland are still offering to pay up to €750 towards legal fees for switchers - but this offer is due to end soon

Mortgage Rates Ireland

PTSB - according to the Sunday Business Post today - are planning a 0.5% rate rise on their variable mortgages very soon . If true - the half a percent rise will affect around 70,000 borrowers - and will see the repayments on a 200k mortgage rise by around €50 a month.
If PTSB customers want to find a better mortgage rate - and their outstanding loan is less than 80% of the value of their house - it might be a good idea to switch lenders.
There are still some low fixed rates on offer from other lenders. If you are unsure about fixing - you could ask lenders to do half the mortgage on a fixed rate and the other half on variable rate .

According to TD Terence Flanagan - as at November 2009 only two mortgages were drawn down as part of the Home Choice Loan scheme. It looks like this scheme was a waste of time and money.

The scheme reportedly has cost close to €300,000 to administer from four local authorities
As at October 2009 - according to a written Dail answer from Michael Finneran - 1,400 prospective purchasers formally registered interest on the Home Choice loan website and only 38 applications were made. Of these - 26 were declined, 3 approvals in principle were issued, 3 applications were withdrawn, and a decision is pending in respect of 6 applications where further information has been sought from the applicant.

Under the scheme first-time buyers who have been refused loans by “normal” lenders can get the funding from the Government, which will lend 92pc of the value of a home. The buyer must earn over €40,000-a-year. The maximum loan is €285k

Mortgage Arrears Figures for Ireland 2009

Mortgage Arrears of 3 months or more:
December 2006 11,252 (1.21%)
June 20008, 13,931 (1.44%)
September 2009 26,271 ( 3.3%)

In 3 years - the percentage of residential mortgage accounts in arrears of 3 months or more has more than doubled.

As at Sept 2009 there were 17,767, or 2.2% mortgage accounts that were more than 180 days in arrears.

AN increase in ECB interest rates is not on the radar at present, the governor of the Bank of Spain said this week. Miguel Angel Fernandez Ordonez, who sits on the ECB Governing Council, noted that the markets did not expect any change before the second half of next year.

A separate report by The Economist this week went as far as saying “We maintain our euro zone monetary policy forecast, in which the European Central Bank (ECB) does not raise its policy rate until the first quarter of 2011. ”

This week Bank of Ireland changed the amount it will give to mortgage switchers to help with legal fees. BOI used to offer up to €1000 euro to people who moved their mortgage to them . They have now dropped that offer of help towards legal fees to €750 . The offer is only available if you apply direct to BOI.

See the list of the Best Mortgage Rates in Ireland to see if it is worth switching.

As we mentioned a few weeks ago - mortgage ratesavailable in Ireland are generally lower than the majority of European countries.
EBS has now said the interest rates it charges on variable mortgages will have to rise - probably in early 2010.

Mr Murphy the CEO - said EBS was doing all it could to keep rates low, but he pointed out that similar charges in France, Germany and the UK were 50% higher than in Ireland.

Mortgage rates in Ireland are some of the lowest in the Eurozone according to this Eurozone Mortgage Rate Comparison article in MoneyguideIreland there were only 2 countries in the Euro Zone with lower rates than Ireland. Irish mortgage rates are much lower than France and Austria - but still there is uproar when PTSB start to raise mortgage rates. More rate rises could be on the cards in the coming months as banks try to bolster profits and the global economy starts to kick in. (Hopefully)

A website calling itself Irish Peoples Union has been set up - supposedly to collect details of people who disagree with the PTSB mortgage rate rise. No details of who is running the site - just a form to collect registration details.
There is much more to mortgage rates than the ECB rates - so it is doubtful that PTSB will reverse it’s business decision because of a few people protesting.
More mortgage rate increases are expected in the coming months.

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