There is no shortage of money. Also, banks are comfortable selling it. Homebuilding is skyrocketing, but trying to get everything married together seems like an impossible question, especially for first-time buyers (FTBs).
In a mortgage situation that changes so rapidly that the market can’t keep up, so-called non-bank lenders, financial institutions, and even credit unions replace traditional bank friendships with only three players left. It’s up to the new player.
FTB accounts for more than 50% of mortgage approvals. Demand is stable and strong. According to the Banking and Payments Federation Ireland (BPFI), 54,000 new mortgages have been approved in the last 12 months, worth € 1.16 billion in April, a traditionally strong month. But growth is slowing.
It’s not surprising as it looks like it’s peaked. These numbers are the highest since 2011, with median home prices above boom levels. But like the Irish market, you need to look a little at the crystal ball.
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No one should bow. Borrowers currently need € 77,000 in income to ride a real estate ladder. This is the highest amount since 2008. As expected, BPFI’s Brian Hayes said that this was due to the lack of support such as mortgage interest relief, and the central bank’s loan-to-income (LTI) to loan-to-value (LTV) ratio was irresponsible. It has the intended effect of suppressing it.
The average LTI ratio in 2008 was 4.5 times salary, but by 2017 it had dropped to 3.2.
“New mortgage customers need higher incomes to buy a home,” says Hayes. However, much more generous state support, such as purchase support schemes, supports anthropogenic trends and certainly diminishes the impact of these numbers. So something else is working.
Lender
The market is shifting around that axis. Non-bank lenders (NBLs) now account for 14% of mortgages, according to the central bank. It increased from only 3% in 2007. You don’t have to hold a fine reserve for a “pillar” bank because it’s agile, doesn’t have an expensive retail branch network, and is classified as a “retail credit company”. Same regulatory capital requirements.
The downside is that the funding structure can lead to faster interest rate hikes, as Avant and ICS recently proved.
They are attracted to cashback offers and are favored by many in the buy-tourette sector rather than the traditional first timers that tend to apply where they have checking deposits. The main difference is that NBL operates primarily through the broker network. 95% of loans are sold through brokers, compared to 32% of banks.
Prices are a major factor, especially for interest rate-sensitive investors.
“By 2021, the average interest rate on the NBL was lower than banks in all segments of the market except refinancing,” said the central bank.
Unlike banks that rely on their customers’ deposits, NBL has access to market financing. Market financing can be more sensitive to global expansion.
Locking one of these low fixed rate mortgages seems easy.Joey Sheehan, author Mortgage coach, I certainly think so.
“Certain mortgage holders can fix a 25-year fixed interest rate from 2.5pc to 2.95pc, depending on the loan-to-value,” he says. “Housing prices continue to rise, but some market commentators believe that this rise will slow as the years go by. But now, many mortgage holders have enough capital in their homes. And you need to take advantage of this to secure lower interest rates.
“We are encouraging mortgage holders to take immediate action to fix the highest interest rates available on the market,” says Sheahan.
The rate at which someone pays for the largest loan they’ve probably ever had has a big impact on the total amount they pay back on their mortgage.
This is the difference in interest rates of € 97,000 as a result of the 25-year mortgage declining from a floating rate of 4.5% to a fixed rate of 2.5% for 25 years, “he adds.
Doddl.ie’s Martina Hennessy agrees.
“Irish consumers tend to prefer the most popular short-term fixed mortgage rates over a three- and five-year period,” she says. “But now we are shifting to 5-year, 7-year, and 10-year products to keep interest rates down and secure medium- to long-term repayments.”
She also mentions things she can’t mention.
“It’s worth investigating whether it’s worth breaking out of existing short-term contracts and sticking to long-term offerings.”
If there is no break fee (and often not), it makes sense to fix it for a longer period.
Will be green
Homeowners may unnecessarily pay an average of € 4,468 per year for additional mortgage repayments by not checking if they are eligible for a green mortgage. Building Energy Ratings (BERs) of B3 and above are typically eligible for green mortgages by introducing a market-leading fixed interest rate of 1.9pc. The cost of a BER certificate is about 150 euros.
Switch, modify, save
More than 7 out of 10 new mortgages have fixed interest rates. It’s no wonder they offer good rates, as it fixes consumers and banks fix their profits in the future. After all, they borrow their own money for free.
But things change as interest rates rise. There are pros and cons to fixing the rate. On the one hand, borrowers are certain when living costs are rising. However, modifying it for too long means that it cannot explain life events such as sales, divorces, and transactions. If you need to break a contract, you may be fined a lot.
Savings can be significant if the strengths outweigh the weaknesses. For switchers, you may not even need to move the lender – just request a better rate, without paperwork.
This is an example of a € 250,000 unpaid mortgage loan for 22 years on a B3 BER rated property worth € 212.000 (loan-to-value is 80pc).
Standard variable rate (SVR) is the most expensive. For example, Ulster Bank charges a whopping 4.3pc and the cost of this loan is € 1,466. However, the two-year fix is only 2.25pc, saving 265 euros a month.
Similarly, the PTSB’s SVR is 4.5 pc (1,493 euros), but moving to a five-year “green” fixed exchange rate of 2.35 pc will save 279 euros each month. Savings of € 3,348 a year are enough to pay for the energy for the year.
For a long-term warranty, BOI’s 10-year fixed at 3 pc is € 1,295, while the 20-year fixed from Finance Ireland is 2.75 pc, which is € 1,263.
