AIB SRV heading to 5%

kennyb3

Very surprised there is no thread about this.

http://www.independent.ie/business/personal-finance/property-mortgages/mortgage-interest-rise-could-affect-up-to-300000-29082118.html

I'd expect BOI to follow as they always do.

I can't imagine many people are ready for the 6%+ rates i'm expecting in 3 years plus.

A 5% rate when the ECB rate is just 0.75% is scary.

There'll be a lot of homeowners praying the eurozone recovers very slowly and steadily.

It's interesting that AIB moved on this first, and there was no objection from the government (not a peep so far). I'd have put money on it being BOI and AIB sheepishly following so that BOI would take the flack.

quad_red

kennyb3 wrote: »

Very surprised there is no thread about this.

http://www.independent.ie/business/personal-finance/property-mortgages/mortgage-interest-rise-could-affect-up-to-300000-29082118.html

I'd expect BOI to follow as they always do.

I can't imagine many people are ready for the 6%+ rates i'm expecting in 3 years plus.

A 5% rate when the ECB rate is just 0.75% is scary.

There'll be a lot of homeowners praying the eurozone recovers very slowly and steadily.

At 8 per cent interest rates, myself and the mrs (both full time employed professionals) could probably just about afford a three bed in Finglas or Crumlin after creche fees and taxes.

kennyb3 wrote: »

It's interesting that AIB moved on this first, and there was no objection from the government (not a peep so far). I'd have put money on it being BOI and AIB sheepishly following so that BOI would take the flack.

Presumably the Government are following the line that the only way they'll offload their shares in the banks is if the banks are being run to return them to profitability. Whether this makes sense on a macro economic scale, increasing mortgage rates increases income. They can't do it with the majority of their mortgage books which are trackers so they're going to hammer variables.

This has always been on the cards.

And it puts into perspective the 'value' now offered by a 'bargain' house in 2013.

kennyb3

quad_red wrote: »

At 8 per cent interest rates, myself and the mrs (both full time employed professionals) could probably just about afford a three bed in Finglas or Crumlin after creche fees and taxes.



Presumably the Government are following the line that the only way they'll offload their shares in the banks is if the banks are being run to return them to profitability. Whether this makes sense on a macro economic scale, increasing mortgage rates increases income. They can't do it with the majority of their mortgage books which are trackers so they're going to hammer variables.

This has always been on the cards.

And it puts into perspective the 'value' now offered by a 'bargain' house in 2013.

Exactly, it's going to be interesting times with the trade off of how much extra income they can generate as against how many others on SRV's they push over the bread line and into arrears.

D3PO

I didnt really see this as big news tbh so didnt bother posting about it. We all knew SVR's were only going one way and even with the latest increase AIB's SVR is low in comparrison to the other mortgage lenders in this country.

re pushing people into arrears im pretty sure there will be some level of discression regarding the increase on persons who cannot pay, however if not you ahve to say that the home owners can only blame themselves.

SVR's have been on the rise for quite a while if somebody was in a position where they were worrying about rate increases pushing them over the edge they should have locked into fixed rates. If they gambled then it was irresponsible on their behalfs.

kennyb3

D3PO wrote: »

I didnt really see this as big news tbh so didnt bother posting about it. We all knew SVR's were only going one way and even with the latest increase AIB's SVR is low in comparrison to the other mortgage lenders in this country.

True but a 0.7% move in one fell swoop is a very significant change. I just wanted to highlight it again as it's probably the single biggest factor in terms of affording a house (price being a given obviously)

I just think people need to start preparing themselves for 6% and 7% rates. Having spoken to people in the process of buying at present they are oblivious to this.

D3PO wrote: »

re pushing people into arrears im pretty sure there will be some level of discression regarding the increase on persons who cannot pay, however if not you ahve to say that the home owners can only blame themselves.

SVR's have been on the rise for quite a while if somebody was in a position where they were worrying about rate increases pushing them over the edge they should have locked into fixed rates. If they gambled then it was irresponsible on their behalfs.

I wonder how many on the 2012 buying thread locked themselves into a fixed rate? Be interesting to know.

As i said I still think it really affects those who bought for high prices on the way down (2008 - 2010), when trackers were gone and interest rates were falling. ouch!

ted1

So there going to let people off who are in arrears and make the people who are paying there's pay for the people in arrears.
Think I may stop paying

D3PO

kennyb3 wrote: »

True but a 0.7% move in one fell swoop is a very significant change. I just wanted to highlight it again as it's probably the single biggest factor in terms of affording a house (price being a given obviously)
!

they arent increasing by 0.7% in one foul swoop. you need to reread the original article.

kennyb3

D3PO wrote: »

they arent increasing by 0.7% in one foul swoop. you need to reread the original article.

No you do;

''He said banks were anxious to see the average variable rate go from around 4.3pc to 5pc''.

"It's not going to be a whole series of raises."

D3PO

kennyb3 wrote: »

No you do;

''He said banks were anxious to see the average variable rate go from around 4.3pc to 5pc''.

"It's not going to be a whole series of raises."

Since when does Micheal Dowling WHO ? of Abacus Finance have any creedence in telling the press what AIB are going to do with their rates.

AIB never said they were going to increase their rate by 0.7% Mr Duffy has indicated they are likely to increase their rates but prefaced that by saying there wont be a series of raises as some kind of assurance to their customers.

kennyb3

okay i'll make it clearer;

AIB boss David Duffy said: "It's not going to be a whole series of raises."

That's what the article clearly states.

It's also what i've heard from internal sources.

D3PO

kennyb3 wrote: »

okay i'll make it clearer;

AIB boss David Duffy said: "It's not going to be a whole series of raises."

That's what the article clearly states.

It's also what i've heard from internal sources.

I will believe it when I see it. I love these internal sources, gossip mongers who for the most part arent sernior enough to have a clue whats going to happen.

FWIW I know senior managers in AIB who have said they havent heard any decision on rate increases.


its not going to be a whole series of raises translates to yes we will be increasing variable rates but for those on a variable dont panic this isnt the start of a raft of increases.

roro2

My guess is that it will be one increase of 0.5%. With David Duffy not giving any indication of the size of the increase, the 0.7% is just a plug figure from some mortgage broker to add to a nice round 5% so the Indo can come out with front page headlines like "That could add €1,000 a year to annual repayments", when really there has been no indication of what the increase will be.

D3PO

roro2 wrote: »

My guess is that it will be one increase of 0.5%. With David Duffy not giving any indication of the size of the increase, the 0.7% is just a plug figure from some mortgage broker to add to a nice round 5% so the Indo can come out with front page headlines like "That could add €1,000 a year to annual repayments", when really there has been no indication of what the increase will be.

thats precisely my read on the situation aswell.

quad_red

What do the heads in here think people should be stress testing themselves at?

kennyb3

quad_red wrote: »

What do the heads in here think people should be stress testing themselves at?

Personally i'll be stress testing myself up to about 8%, but that's just me.

D3PO

quad_red wrote: »

What do the heads in here think people should be stress testing themselves at?

id be stress testing at 8.5 to 9%

mel.b

With what I have been approved for if SVR reached 10% :eek: I'd be paying 40% of my take home pay fortnightly (providing no significant and major cuts with Croke Park II which can't be certain). While it wouldn't be nice I'm currently saving more, so I know i could manage.

killers1

Rather than just using a % on a stress test of the mortgage repayment I'd be inclined to look at it a slightly different way. Add up your current rent payment + average monthly savings contribution from income alone over the past 12 months. The greater the difference between that & your proposed mortgage repayment the more comfortable you will be in dealing with rate increases. It doesn't always boil down to what your salary is, more important is how you manage your money. I've seen people who earn €100k really struggle with a 0.5% rate increase and I've seen people earning €50k with the same size mortgage who could cope comfortably with a doubling in interest rates.

D3PO

mel.b wrote: »

With what I have been approved for if SVR reached 10% :eek: I'd be paying 40% of my take home pay fortnightly (providing no significant and major cuts with Croke Park II which can't be certain). While it wouldn't be nice I'm currently saving more, so I know i could manage.

thats the key to stress testing IMO. Work out the worst case, save the difference and have that buffer in rainy day money and be conditioned to live off that amount. That said 30% is about 10% more than id be comfortable with but at least your taking a relatively pragmatic approach to things.

StillWaters

D3PO wrote: »

thats the key to stress testing IMO. Work out the worst case, save the difference and have that buffer in rainy day money and be conditioned to live off that amount. That said 30% is about 10% more than id be comfortable with but at least your taking a relatively pragmatic approach to things.

If SVR gets to 10%, we would be looking at serious inflationary pressure, so your wages would probably have risen too.

Can't see it happening again for the next 10 years anyway.

Villa05

StillWaters wrote: »

If SVR gets to 10%, we would be looking at serious inflationary pressure, so your wages would probably have risen too.

Can't see it happening again for the next 10 years anyway.

If the ECB rate is at an emergency level, common sense would dictate that anyone going for a mortgage, at a minimum, would stress test themselves at a normal rate of 3 to 4% + Bank markup of 4% giving a total of 8%.

If we get high inflation in Germany which is not beyond the bounds of possibility, expect mortgage rates to be 10%+.

Wide scale debt forgiveness will put additional pressure on the Bank markup

Do not expect your wages to rise to account for this, Our wages rose significantly above average European rates over the bubble era (1996 to 2008) We are more likely to have stagflation while Europe has inflation.

murphaph

Villa05 wrote: »

If we get high inflation in Germany which is not beyond the bounds of possibility, expect mortgage rates to be 10%+.

Indeed, Germany is the key and what's happening here in the property market (at least in many regional markets) is house price and rent increases.

Rich Greeks and Italians (and Germans) have decided that German property is a safe haven for their money in these times of economic uncertainty, so property and with it rent is on the up. I would go so far as to say that there are regional housing bubbles forming in Germany.

This could drive demands for German wages up and result in a general increase in inflation, which would see ECB rate rise IMO.

The weird side effect of a property market collapse in peripheral EU states is a property boom in Germany.

The_Conductor

Villa05 wrote: »

If the ECB rate is at an emergency level, common sense would dictate that anyone going for a mortgage, at a minimum, would stress test themselves at a normal rate of 3 to 4% + Bank markup of 4% giving a total of 8%.

If we get high inflation in Germany which is not beyond the bounds of possibility, expect mortgage rates to be 10%+.

Wide scale debt forgiveness will put additional pressure on the Bank markup

Do not expect your wages to rise to account for this, Our wages rose significantly above average European rates over the bubble era (1996 to 2008) We are more likely to have stagflation while Europe has inflation.

Wim Duisberg indicated several times that 'normalisation' of rates would indicate an overnight rate of 4.5%. Normal lending practices are to put 1% on top of this (and this is indeed the longterm lending rate in the Netherlands and Germany) giving you a securitised lending rate of between 5.5 and 6% (note- this tends to be fixed for the term of the mortgage- something we simply don't do here).

Villa05

smccarrick wrote: »

Wim Duisberg indicated several times that 'normalisation' of rates would indicate an overnight rate of 4.5%. Normal lending practices are to put 1% on top of this (and this is indeed the longterm lending rate in the Netherlands and Germany) giving you a securitised lending rate of between 5.5 and 6% (note- this tends to be fixed for the term of the mortgage- something we simply don't do here).

Agree 100%, unfortunately we are not going to see normal banks for the duration of the mortgage, therefore, the 4%+ on top of the ECB rate is probably here to stay.

quad_red

smccarrick wrote: »

note- this tends to be fixed for the term of the mortgage- something we simply don't do here).

Why don't we do that here? It would bring an enormous amount of stability and security wouldn't it?

People could plan.

Villa05

quad_red wrote: »

Why don't we do that here? It would bring an enormous amount of stability and security wouldn't it?

People could plan.

We are a basket case economy that only think short term and to hell with the consequences. Planning for the future has no place in a basket case economy

Chris_5339762

If I could switch my mortgage to a 5% (say) 10 or 20 year fixed with ability to overpay I'd jump on it. Having a maximum of 3 years fixed is just too low. Whilst I could take a hit of a few % in the SVR increase I'd rather not have to as my wages wont be going up for years.

StillWaters

Villa05 wrote: »

If the ECB rate is at an emergency level, common sense would dictate that anyone going for a mortgage, at a minimum, would stress test themselves at a normal rate of 3 to 4% + Bank markup of 4% giving a total of 8%.

If we get high inflation in Germany which is not beyond the bounds of possibility, expect mortgage rates to be 10%+.

Wide scale debt forgiveness will put additional pressure on the Bank markup

Do not expect your wages to rise to account for this, Our wages rose significantly above average European rates over the bubble era (1996 to 2008) We are more likely to have stagflation while Europe has inflation.

Whilst I agree that it's possible, if not probable that inflation is likely to become a problem at Europes core as the economy recovers, I disagree that Ireland will face stagflation, I don't think we are as peripheral as you think.

makeorbrake

Chris_5339762 wrote: »

Having a maximum of 3 years fixed is just too low.

I've never considered fixing for this very reason - it's pointless to fix for 3 years. A lot of people have justified fixing on the basis that they know exactly what their outgoings are - but if it's just for three years, they are setting themselves up for a shock at the end of the three year period......so therefore, what's the point.

The_Conductor

On the continent its considered the norm to fix for the entire length of the mortgage- and the mortgages in turn are held by pensions companies- who consider the 5-6% return a reasonable return, as the investments are considered to be very low risk. The current issue in Ireland- particularly given our PPR guarantees- is why on earth would a pension fund consider investing in similar mortgages- if the person paying the mortgage stops paying, the family home is considered sacrosanct- so any investor would be out on a limb. The only way a pension company would be happy to invest here, is if there was a sufficient risk premium associated with the investment- given our treatment of the family home- I'd hazard a return in excess of 10% would be merited- which would crucify any potential mortgagee.

The rules governing family homes- is most probably why its simply not feasible to lock rates for the life of a mortgage, in an Irish context.

We need to grow up. Its all well and good guaranteeing a roof over everyone's head- but like that woman in Blackrock who's milking Axa at the moment- a roof shouldn't be the Four Seasons- accommodation should be accommodation, and if its unaffordable, people should be forced to cut their cloth to fit their means. Our politicians don't have the guts to grasp this mettle though.

spockety

smccarrick wrote: »

On the continent its considered the norm to fix for the entire length of the mortgage- and the mortgages in turn are held by pensions companies- who consider the 5-6% return a reasonable return, as the investments are considered to be very low risk. The current issue in Ireland- particularly given our PPR guarantees- is why on earth would a pension fund consider investing in similar mortgages- if the person paying the mortgage stops paying, the family home is considered sacrosanct- so any investor would be out on a limb. The only way a pension company would be happy to invest here, is if there was a sufficient risk premium associated with the investment- given our treatment of the family home- I'd hazard a return in excess of 10% would be merited- which would crucify any potential mortgagee.

The rules governing family homes- is most probably why its simply not feasible to lock rates for the life of a mortgage, in an Irish context.

We need to grow up. Its all well and good guaranteeing a roof over everyone's head- but like that woman in Blackrock who's milking Axa at the moment- a roof shouldn't be the Four Seasons- accommodation should be accommodation, and if its unaffordable, people should be forced to cut their cloth to fit their means. Our politicians don't have the guts to grasp this mettle though.

But... but... the famine... our colonial past... oppressive landlords.... It's in the "fibre of our being"...

L1011

spockety wrote: »

But... but... the famine... our colonial past... oppressive landlords.... It's in the "fibre of our being"...

To make this even more bollox, I've done a hell of a lot of geneology research for my family recently and in 1911 only those on an island that the British govt. bought off the landlord and divvied up and a publican who owned her own pub in Dublin out of the ~50 relatives who were householders on that census actually owned their own place. Remember that this is well after the Land Acts, Congested Districts Board, etc. People only really started to own their homes as a norm well after independence.

This "the Irish always want to own a home" concept is less than 100 years old and I've no idea why it was ever invented; and the more its parroted the more it'll stick.

If we had continental rental practices rather than the gombeen landlords (That you see so many of on this forum - trying to figure out the bare minimum level of maintenance they can get away with for instance, or when they can keep deposits), longer leases and unfurnished available I doubt I'd ever have bought. And that's even with the surreal local bubble here which means that a decent condition large 3 bed costs 1,100 to rent a month and my mortgage is currently 725.

The idea that I'd pay a landlord for use of and then be stuck waiting for them to deal with a broken washing machine, etc; or be told I couldn't paint the walls in a house, be limited in getting utility companies in, all that standard crap we have here are MAJOR disincentives to long term / lifelong renters.

murphaph

MYOB wrote: »

If we had continental rental practices rather than the gombeen landlords (That you see so many of on this forum - trying to figure out the bare minimum level of maintenance they can get away with for instance, or when they can keep deposits), longer leases and unfurnished available I doubt I'd ever have bought. And that's even with the surreal local bubble here which means that a decent condition large 3 bed costs 1,100 to rent a month and my mortgage is currently 725.

The idea that I'd pay a landlord for use of and then be stuck waiting for them to deal with a broken washing machine, etc; or be told I couldn't paint the walls in a house, be limited in getting utility companies in, all that standard crap we have here are MAJOR disincentives to long term / lifelong renters.

To be honest you hear plenty of stories of German landlords retaining deposits for the thinnest of excuses and things like washing machines and fridges do not have to be provided by German landlords at all, so they naturally don't have to fix them when they break.

IMO Irish tenants are really quite molly coddled and the notion that Irish tenants live at the mercy of cruel and despotic landlords while their European equivalents enjoy some sort of renters utopia is really quite wide of the mark. A German landlord would baulk at the idea of being forced by law to supply a fridge, never mind a freezer!

German tenants have more rights wrt security of tenure (though in Ireland it's pretty good too) but don't be fooled by the hype: German landlords can also claim Eigenbedarf (required for own use) and can legally evict a long standing tenant if he needs the property for himself or a close relative (I think spouse, parent or child is allowed).

German tenants also have more responsibility: The Kelinreparaturklausel (small repairs clause) is standard in German leases and states that anything a tenant can touch that breaks must be repaired by the tenant (up to a value of €200 per item, capped at €400 per year).

The law in Germany has also been amended (will come into force in a month or two) and the amendments broadly favour the landlord. New fast track procedures to evict non-paying tenants and new procedures to handle the "surprise sub tenant" trick that Mietnomaden (Rent Nomads) have until now taken advantage of to avoid lawful eviction by the bailiffs.

From now on also, a tenant who disputes a case in court (possibly to delay eviction) will be forced to pay the equivalent rent to the clerk of the court for the entire duration of the proceedings, which can then be handed to the landlord in the case he wins the case. This measure alone is expected to remove many tenants chancing their arms from the system and to speed up the judicial process.

German landlords can now also carry out energy efficiency related improvement works for up to 3 months in duration before a tenant can reduce the rent due to noise/dust. Previously tenants could reduce the rent immediately, even though they might well be the beneficiaries of the improvements! the new law seeks to redress this silliness.

Tenants want all the protections under the sun, but when a landlord complains that it's too difficult to evict a non-paying tenant or one who is intentionally damaging the landlord's property, he is told "risk of the business bud".

L1011

I'd far prefer German tenants responsibilities if it came with things like landlords not expecting a divine right to a random viewing ( e.g. just swanning in unannounced). Ditto furniture/appliances as that should lead to lower rents

oflahero

MYOB wrote: »

landlords not expecting a divine right to a random viewing ( e.g. just swanning in unannounced).

This isn't kosher here either. At least 24 hours' advance notice must be given, and with both parties' agreement.

L1011

oflahero wrote: »

This isn't kosher here either. At least 24 hours' advance notice must be given, and with both parties' agreement.

Doesn't stop a huge amount just doing it.

makeorbrake

MYOB wrote: »

I'd far prefer German tenants responsibilities if it came with things like landlords not expecting a divine right to a random viewing ( e.g. just swanning in unannounced). Ditto furniture/appliances as that should lead to lower rents

It's not any different. Had to make apartment available for a viewing before I had seen out lease/notice period while in Germany. They gave me notice of course - but as already has been pointed out, this should (and I would imagine usually does) happen here also.
Furthermore, it is par for the course that an apartment is painted by the vacating tenant prior to leaving in Germany! I was a bit surprised by this one. It doesn't matter if it doesnt even warrant it (in our case, it was hard to see that it did) - thats expected and is common practice.

On another occasion, I was apartment hunting - and thought I had found what I needed. I went to do the deal - and had handed cash over - when the guy then explained to me he was an agent and he also wanted his fee (I can't remember what it was, but it was definitely a significant amount). I immediately took the cash back out of his hands. He was a bit miffed - saying that this was normal procedure over there (and as I later learned, it is - although not in all cases).

Somebody mentioned about German landlords not having to fix appliances, etc - and this is most definitely true. When you rent an apartment there, you get apartment, the walls the floors and hardly anything else! I had to bring my own kitchen ( i kid you not) - with me ( i got this from another irish guy who was moving out of another place and didnt know what the hell to do with the kitchen worktops, hob/oven, etc that he had.

So - long story short - the grass isn't necessarily greener further away. However, there are cultural differences that do make the difference in terms of both the landlord and tenant dynamic i.e. people generally have more respect for property over there and take responsibility in that regard.

twerg_85

Chris_5339762 wrote: »

If I could switch my mortgage to a 5% (say) 10 or 20 year fixed with ability to overpay I'd jump on it. Having a maximum of 3 years fixed is just too low. Whilst I could take a hit of a few % in the SVR increase I'd rather not have to as my wages wont be going up for years.

AIB have a 10yr fixed mortgage. Current rate is 5.9% on it and you could mix fixed/standard or even different fixed terms.

F.

roro2

twerg_85 wrote: »

AIB have a 10yr fixed mortgage. Current rate is 5.9% on it and you could mix fixed/standard or even different fixed terms.

F.

Not on their website?

http://www.aib.ie/personal/mortgages/New-Mortgage-Interest-Rates

twerg_85

No, apparently there's very little interest in so not on the website ... bit chicken and egg though I guess.

I was told about it by one of their mortgage advisors.

F.

roro2

It's at least as attractive as the other fixed rates in my opinion, for a portion of a mortgage anyway. Especially if the SVR is going up by 0.5% this year.