EBS Building Society is the latest mortgage lender to increase its variable mortgage interest rates by 0.6%. This recent increase also applies to anyone who has a mortgage with Haven Mortgages, the Broker arm of EBS.
Is this rate increase justified?
EBS will quote the cost of funding and the fact that they have to become a profitable company again in order to start paying back the money that the government has pumped into the society. On the one hand it does seem logical that they cannot continue to make a loss on mortgages if they are to move forward and become profitable again. However this is very hard for mortgage customers to take as they are the ones who have effectively saved the banks with the tax payers bailouts.
Variable rate mortgage cusotmers are really the only ones that the banks can use to increase their profit margins on morgages. Tracker rates can only be increased when the ECB moves rates but it is unlikely to do so in 2010.
Unfortunately it seems like there are more interest rate increases to come this year and next. There is a good chance that Bank of Ireland, AIB, Ulster Bank and Irish Nationwide will also increase rates before the end of August.
These variable rate increases will not affect those on fixed or tracker rates. Those on fixed rates however will be moving onto higher variable rates once their fixed rates end. Those on trackers will not see any movement until the ECB moves rates.
Anyone on variable rate mortgages really should consider a fixed rate. Fixed rates have increased over the last 12 months and in hindsight last year was the time to fix. However there are still some good fixed rates available.
Tuesday, July 20, 2010
Thursday, July 1, 2010
Negative Equity Mortgages. Right or Wrong??
According to Charlie Westin negative equity mortgages are on the way with some mortgage lenders already offering them to their existing customer.
Are Negative Equity Mortgages a Good Idea??
It is obviously not a good idea to have a mortgage for more than your property is worth, however many people in Ireland today (me included) are in negative equity through no fault of their own. If you are in a property you are happy with and you can afford the repayments then negative equity is not necessarily a total nightmare. The hope is that in time property prices will recover. How long this will take is anybodys guess but you would imagine that prices cant continue to fall indefinately.
As I see it there are two main groups of people who are suffering badly from negative equity. The first group of people are those who simply cannot afford to make their mortgage payments. With no option to sell the property they are stuck in an awfull situation. Most mortgage lenders are helping people with interest only repayments and in some cases agreeing to write off the negative equity if the property is sold for the current market value. If you are unable to make your mortgage payments you really need to approach your mortgage lender and see what your options are. If you cannot get anywhere with your mortgage lender then firms like DebtLine can offer help and advice.
The second group of people badly affected by negative equity are able to afford their repayments but need to move. This group of people most likely bought an appartment or a starter home just to get on the property ladder in the Celtic Tiger property rush. This is the group that can be helped with negative equity mortgages. A negative quity mortgage will help them move and get on with their lives. They will still be in a negative equity situation but it is much easier to handle if you are in a property you want to be in.
From a Banks point of view it is much better to have a negative equity customer in a home they are happy with. There is much less chance of repayment deliquency you would think.
In my opinion negative equity mortgages used correctly for people already in negative equity can be a workable solution for mortgage customers and mortgage lenders. Hopefully we will start to see more information on negative equity mortgages sooner rather than later.
Are Negative Equity Mortgages a Good Idea??
It is obviously not a good idea to have a mortgage for more than your property is worth, however many people in Ireland today (me included) are in negative equity through no fault of their own. If you are in a property you are happy with and you can afford the repayments then negative equity is not necessarily a total nightmare. The hope is that in time property prices will recover. How long this will take is anybodys guess but you would imagine that prices cant continue to fall indefinately.
As I see it there are two main groups of people who are suffering badly from negative equity. The first group of people are those who simply cannot afford to make their mortgage payments. With no option to sell the property they are stuck in an awfull situation. Most mortgage lenders are helping people with interest only repayments and in some cases agreeing to write off the negative equity if the property is sold for the current market value. If you are unable to make your mortgage payments you really need to approach your mortgage lender and see what your options are. If you cannot get anywhere with your mortgage lender then firms like DebtLine can offer help and advice.
The second group of people badly affected by negative equity are able to afford their repayments but need to move. This group of people most likely bought an appartment or a starter home just to get on the property ladder in the Celtic Tiger property rush. This is the group that can be helped with negative equity mortgages. A negative quity mortgage will help them move and get on with their lives. They will still be in a negative equity situation but it is much easier to handle if you are in a property you want to be in.
From a Banks point of view it is much better to have a negative equity customer in a home they are happy with. There is much less chance of repayment deliquency you would think.
In my opinion negative equity mortgages used correctly for people already in negative equity can be a workable solution for mortgage customers and mortgage lenders. Hopefully we will start to see more information on negative equity mortgages sooner rather than later.
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