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Should You Fix Your Mortgage Rate?

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Keeping that Roof above Water

We have spoken recently about the struggles facing prospective homeowners and their long term range of effects on the market at large. Something we haven’t touched upon thus far is the struggles facing those who already have a foothold on the property ladder, existing homeowners currently holding a mortgage. Whilst this may seem like the ideal status for those struggling to buy their first home, there are of course issues which apply here that may not be considered.

It has been reported recently that homeowners could see a marked increase on their mortgage bills in years to come. This is due to the fact that European interest rates are set to begin to rise from 2019 to 2020 as the European Central Bank is expected to increase its main refinancing rate. Depending on the rate of mortgage and the loan size, this could see mortgage payments possibly increase by a couple of hundred euro.

These European interest rates have been at a stable low for many years, with many homeowners likely to not have experienced excessive rises in their time. In the atmosphere of uncertainty as we wait for the confirmation of these changing rates, what action can be taken either on new or old mortgages to limit the amount of damage to your pocket?

Fix it Up:       

A fixed rate mortgage can often seem like the most expensive option on the surface when choosing your mortgage, but can be quite the saving grace at times like these when rates are in flux as this option fixes your mortgage rate at one price for a certain period of time.

Whether choosing your mortgage or switching, a fixed rate might be the perfect option during these uncertain times and may offer you a slight buffer.

Pay, Pay, Pay:

Although it can be tempting when funds are low to take out further loans to replenish emptying pockets, this is likely to be damaging in the long run as your repayments begin to stack up. Instead of this, it is advisable to keep your mortgage payments up to date, and even overpay whenever possible in order to reduce your overall term.

In addition to this, clearing off any other debts you may have from loans or credit cards is advisable as the goal is to reduce your monthly repayments to as few as possible, with your mortgage being the ultimate priority. This will avoid you paying higher interest rates on other loans as well as your mortgage.

Should you be in a position of struggle when these rises come into play, be sure to discuss with your provider and solicitor options for restructuring your mortgage in order to avoid any long term issues.

Should you have any queries or require further information on this or any other business or financial matter please don’t hesitate to contact us here at EcovisDCA’s new head office, where as always we will be delighted to help.

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~ DCA PARTNERS, DECLAN DOLAN & EAMONN GARVEY

The Affordable Mortgage Scheme

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The First Time Ever you saw your Own Home

We have spoken many times in the past about the ongoing increase in house prices and the ways that these rises combined with stricter mortgage rules have begun to effectively squeeze many first time buyers out of the market. Similarly, the rapid increase of rental costs has dampened many prospective buyers hopes as these costs make it increasingly difficult to get a deposit together. In recent years it has become very difficult to be a hopeful first time buyer, but it seems that there might be a blink of hope on the horizon for prospective buyers on lower incomes.

It was announced this week that the Government has set aside €200m to fund a new scheme entitled the Affordable Mortgage Scheme to offer relief to first time buyers on lower incomes. The scheme will see local councils offer mortgages at lower interest rates than the majority of lending banks and crucially, will be fixed for the duration of the loan. This is said to save buyers up to €10,000 over the duration of their mortgage. The scheme is set for a relatively immediate start, with a start date of February 1st and is sure to offer some hope for lower income buyers.

Interestingly, the scheme’s loan can be used for second –hand as well as new properties, and to build your own home. This is a departure from all other recent schemes which were available only to new homes, and did not apply to building your own home. Previously, there was a local authority mortgage scheme in place for those who had been previously turned down, but this was offered at a variable interest rate and did not offer the long term savings that the Affordable Mortgage Scheme promises.

Under this scheme first time buyers will have access to loans of up to €288,000 at a fixed interest rate of 2.25% for 30 years. This offers first time buyers the security of knowing their repayments for the duration of their mortgage. Minister for Housing Eoghan Murphy has said of the scheme:

“What this means essentially is that a person or couple can purchase a home, while ensuring that they can still keep their monthly repayments to one-third of their net disposable income – with no risk of their mortgage rate rising and so no threat to their ability to afford repayments, giving them certainty and security.”

The loan will be subject to the same lending rules as the banks, in that buyers will require a 10% deposit on the property. Buyers will need to have evidence of being turned down by two lenders and there is also an income cap of €50,000 per year for single buyers and €75,000 per year for joint buyers. There will also be a limit on the overall price of the home as in the Greater Dublin, Cork and Galway areas the maximum market value of the property cannot exceed €320,000 whilst elsewhere in the country this limit will be €250,000.

Should you require any guidance on any financial or business matters, please do not hesitate to contact us here at EcovisDCA, where we will be happy to assist.

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~ DCA PARTNERS, DECLAN DOLAN & EAMONN GARVEY

Taking the Fear out of Arrears

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Following on from the economic crisis and the subsequent increase in the cost of living and decrease in available work, many thousands of Irish people have been left in mortgage arrears which is a very stressful and uncertain position to be in. As the country begins to regain its financial footing there are of course increases in finance options, but up until this point many Irish householders may have found it quite difficult to avail of advice on these matters during what is of course a difficult financial time.

Recently, Tánaiste Frances Fitzgerald and Minister for Social Protection Leo Varadkar announced an awareness campaign to promote Abhaile, a free mortgage arrears support service which many of those struggling were unaware of.

This news follows a survey which found that many struggling with mortgage arrears are too embarrassed to tell their family and friends about their ongoing issues. This in itself is incredibly problematic as the weight of these issues alone can cause isolation, depression and other mental health difficulties. As such, it is essential that all homeowners who find themselves in arrears should have someone to speak to. That is the service that Abhaile hope to provide. Tánaiste Fitzgerald has stated that despite falling numbers, there are still approximately 34,500 people in this country in long-term arrears. These are the people they hope to reach with this new campaign as it also emerged that over two thirds of people did not know that there were any services available to them to discuss these issues. Minister Varadkar was quoted as saying:

“It’s our firm hope we’ll bring forward thousands more people who are now in need of similar help. The key message is to come forward and seek the help that you need. Don’t be afraid, help is available at no cost and we’re on your side.”

Whilst the fact that the number of repossession cases has halved in recent years is indeed positive news, it is also essential that those still struggling be aware of all of the assistance at their disposal to ensure that these rates continue to fall in the coming years so that we can see a significant reduction in people feeling alone in these issues. It was also revealed that those in long-term arrears are those least likely to seek advice or assistance as they may feel that their situation is hopeless.

Angela Black of the Citizens Information Board has said:

“What we’re doing is asking members of the public to go out there and take a look around at their family and friends and people who might look ok on the surface but who are struggling behind closed doors with mortgage arrears. They might not realise they have access to this free expert financial and legal advice. Family and friends can play a vital role in encouraging people to look for help”

The Abhaile service has assisted 4,500 people since it became fully operational last October.

The Abhaile scheme is administered by the Money Advice and Budgeting Service (MABS).

Its helpline, which is open Monday to Friday 9am to 8pm is 0761072000.

 

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~ DCA PARTNERS, DECLAN DOLAN & EAMONN GARVEY

MORTGAGE WOES KEEP BUYERS ON THEIR TOES.

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Mortgage rules have been a point of contention in Ireland for some time now and whether house prices fall or rise, it has become increasingly difficult for those hoping to gain footing on the first step of the housing ladder. Last year, mortgage rules were changed to mean that only 3.5% of income can be borrows, and there must be a 10% deposit on all mortgages up to €220,000, and a further 20% on any cost above this figure.

 

At the time of this change it was suggested that these rules would be in place for a period of a year and then re-examined. As they were put in place in February last year, all eyes will be on these rules to see if there is any change which might allow for easier purchasing. DNG have suggested that they would like to see the borrowing limit raised to 4% and the 10% deposit rule extended to €300,000 as they have seen over the past year that many people are becoming trapped by these rules and are unable to buy due to higher house prices and stricter rules.

 

It has been reported this week that we may see an even bigger shake up in the mortgage industry. An Australian lender, Pepper is reportedly set to offer new incredibly competitive mortgage rates which will target first-time buyers in particular. This arrival of a new lender is expected to push current Irish lenders into offering new lower rates in order to respond to competition and demand.

 

Already since the announcement we have seen Bank of Ireland offer a new bonus. This bonus would see them add 10% to first time buyers onto their existing deposit savings. Additionally, Bank of Ireland were already offering 2% back of every new mortgage.

 

Pepper is said to be set to offer rates as low as 3.55% for both first time buyers and those looking to switch lenders. Pepper Ireland boss Paul Doddrell has suggested that Pepper will also be first in line with offers for those who have found themselves refused by other banks, including those who are self-employed. It is suggested that Pepper will also be able to lend to those who found themselves in arrears during the financial crisis, but have now found their way back to meeting payments.

 

Whilst these new offers may not be a complete end to Irish mortgage woes as these offers will only be available through brokers, the suggestion of another adjustment of the overly tight mortgage rules will be a welcome one for many first time buyers and prospective first time buyers. It is hoped that we will see a general reduction in rates, with the onset of further competition in the Irish mortgage market. If you require assistance with your own or your company’s finances whilst hoping to gain a mortgage, please don’t hesitate to contact us here at DCA accountantswhere we are always happy to help.