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Granting your Switch Wish

It is obvious that the changing mortgage rules have made it more difficult for first time buyers to enter the property market in recent years. Despite recent changes allowing for a decrease in the necessary deposit required (abolishing the 225,000 cap on a 10% deposit) the continuing rise in house prices has all but ruled many first time buyers out of the market for the foreseeable future. An issue which affects many but has seen much less column inches is the issue of switching your mortgage to another bank. This is something which has been increasingly difficult to accomplish in recent years with the ever changing financial market, but there may be a distant light at the end of the tunnel for those wishing to switch their mortgage in the future to reduce their repayments.

The Central Bank has recently stated that it will be considering imposing new rules which will make it easier for people to switch their mortgage to another lender. This exciting development follows recent research by Behaviour and Attitudes which found that only 4% of mortgage holders had switched to a new lender. Switching your mortgage to another lender can often result in a reduction in your repayments and other benefits as your needs grow and change in your home.

The proposal by the Central Bank would ensure that banks must offer greater clarity to their borrowers to ensure that they have all the information available regarding switching, something which is sorely lacking in the current market. There is also a suggestion that the banks will be required to ensure that borrowers have all the information regarding switching mortgage product and the associated costs of this.

The fact that so many of those surveyed had never even considered changing their mortgage is surprising given that Ireland’s variable mortgage rates have been found to be among the highest in the Eurozone. Lenders do not currently offer enough accessible information about these issues and as such it is not something at the forefront of buyer minds. Acting Deputy Governor Bernard Sheridan has been quoted as saying:

“It is clear that lenders could be doing more to facilitate consumers who are thinking about switching.”

The Central Bank suggests these new changes will be beneficial as over 109,000 people could save money by switching mortgages and will reportedly publish a paper later in the year in which these proposals will be set out.

Should you require any help, guidance or advice on these or any other business and financial matters please don’t hesitate to contact us here at Ecovis DCA where our dedicated advisors will be delighted to be of assistance.

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DCA PARTNERSDECLAN DOLAN & EAMONN GARVEY

Taking the Fear out of Arrears

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 PARTNERSDECLAN DOLAN & EAMONN GARVEY

ICS YOU CAN

Something which we consistently come back to as a topic of interest for our customers are mortgage lending rules and the tiresome process of trying to get a foothold on the property ladder, which let’s face it, these days can often feel like playing a very difficult video game. You’re pressing all the right buttons, but somehow still find yourself placed back at the previous checkpoint. Recently, with minor changes made to the rules for first time buyers it seems that the clouds are clearing somewhat to allow an easier path to your first home. Further good news continues to come in for prospective new home owners in the form of the return of schemes and products which assist in the purchasing process and provide buyers with more options than were previously available. Following on from the economic downturn, all available products and schemes aimed towards making it easier to begin the climb up the property ladder seemed to effectively disappear overnight. Recently we have seen a slow resurgence in these schemes and products which is welcome news. Today we will be discussing the new buy-to-let product from Dilosk and ICS mortgages which is aimed towards both individuals and companies.

 

The idea of buy-to-let is to turn a property purchase into an investment in order to utilise it as a cash flow solution. Upon purchasing the property, it is then placed for rent in the hopes of covering mortgage costs as well as any outgoings and perhaps generating some amount of income for the landlord. Buy to let involves dealing with the expectation of capital growth and thinking in the long-term which can be tricky as these matters are always in flux but it is ultimately a worthwhile endeavour which can generate cash flow which would not ordinarily exist which is never a negative thing these days.

 

ICS’s buy-to-let mortgage package is available to both individual and company investors. The loan structure for both options is fairly similar in that both offer a 10 year interest only option and a 20 year capital and repayment option as well as a minimum term of 5 years and a maximum of 20. The differences arise in relation to the borrowers themselves as there are additional criteria which applies to the individual and not the company investor.

 

The individual must be:

 

  • Min age at application: 21 Years.
  • Max age at maturity: 75 Years.
  • Minimum annual income: €40,000.
  • Max of four applicants.

 

 

The property must also be in the Republic of Ireland. Lending will be made available to those who meet these criteria, have a clean and who wish to buy in any major cities in the Republic of Ireland with more than 10,000 citizens. Further information can be found on their website or by contacting ICS directly. Finally we are seeing some positive movement in the mortgage market

 

Should you require any help, assistance or guidance on these or any other tax or business matters, please don’t hesitate to contact us.

 

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DCA PARTNERSDECLAN DOLAN & EAMONN GARVEY

THAT WHICH SHALL NOT BE NAMED – MORTGAGE RULES

Over the past year, we have discussed mortgage issues at length with the various new changes to mortgage rules and the difficulties this has posed for both business and home buyers, in particular, for the first time buyer. It has become clear since the introduction of these new guidelines that the number of first time buyers was in decline. Recent reports however have shown that not only is this the case, but also the number of mortgages being approved has fallen in recent months.

 

Data from Banking and Payments Federation Ireland (BPFI) shows that from December to February, 1,951 mortgages were approved, which is a drop of 15.1% when compared with the same period in 2014-2015. First time buyers accounted for half of these approvals, whilst re-mortgages accounted for just over 13%. With the number of first time buyers apply for mortgages dropping by 27% in recent years, it is clear that the introduction of the new mortgage rules will continue to have a far reaching consequences on the property market.

 

Rachel Doyle of the Professional Insurance Broker’s Association (PIBA) lamented the situation and its long lasting effects recently, saying that

“The question now is, how much deeper is this crisis going to get before it turns around. If this situation becomes prolonged it will not only continue to prevent first-time buyers, primarily in their 20s and 30s and living in urban areas, particularly the greater Dublin area, from buying their first homes but it will impact the wider economy.”

 

Another change we are seeing is that the actual value of the mortgages approved was down by 5.8% from January to February, undoubtedly a result of new mortgage rules and the slight increase in spending over the Christmas period. The mortgages approved during this three month period are estimated to be worth around €374 million total, which remains in line with the 14% drop in value each year that we have seen in recent years.

 

We are all aware that there is to be a review of these mortgage rules to be published in November, and whilst prospective buyers will be hoping for some changes or leniency, recent comments suggest that this may not be the case. Chief economist Gabriel Fagan spoke at the recent presentation of the Central Bank’s quarterly accounts and stated that whilst a review will be published, it will certainly not result in the abolishment of these rules, and that there is the possibility that the rules may in fact be tightened.

 

Don’t say goodbye to that silver lining of home ownership just yet though as there is still a chance of change. Until that point, if you require any assistance or advice on your own financial matters, please don’t hesitate to contact us here at DCA Accountants.

“We shouldn’t think of a change taking place,” he said, adding that the rules may not be changed at all, or may in fact be tightened.

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DCA PARTNERSDECLAN DOLAN & EAMONN GARVEY

WHOSE HOUSE IS IT ANYWAY?

It comes as no surprise these days that the world of buying your first home has become an increasingly difficult one to navigate. Gone are the days of being able to finance your first home, and also have overflow cash readily available for furnishing and renovations. This year’s introduction of the new mortgage rules has made the process somewhat more difficult for both first and second time buyers to gain access to the funds required. As a result of this, the average age at which couples are buying their first homes has increased greatly in recent years.

 

With these new mortgage rules making it increasingly difficult to save for your first and then subsequent second home, the issue then becomes saving that extra bit of cash to furnish and renovate any problematic areas of your new home. Thankfully, a new Bank of Ireland mortgage initiative promises to help you with this arduous task.

 

Bank of Ireland already promise customers the lowest available 3 year fixed term rate available and 12 month approval. Now, in addition to these promises, Bank of Ireland are offering customers who are first time buyers, movers, or those interested in switching an existing mortgage to Bank of Ireland, 2% cashback on their loan.

 

While 2% may seem an insignificant number at first glance on paper, this could be of great benefit when your savings have immediately gone into the new requirements for deposits. Where there was no real wiggle room to start work on your new home, there now is an unexpected sum available at your disposal. Get thee to a DIY store!

 

To put this figure into perspective, if you are to borrow €150,000 for your new home, Bank of Ireland will then lodge€3000 into the account used for the mortgage. Bank of Ireland state that this payment will be made within 45 days from the mortgage being drawn down. Just in time to start collecting tiles for that new bathroom you would like to put in.

 

This offer applies to mortgages drawn down between 3rd June 2015 and 31st December 2015, so this is a good time to do a check on those all-important savings and hopefully make a move towards your new home.

 

Buying a home is a very expensive yet rewarding endeavour and it is a relief to see some new initiatives announced to assist people on their way. Should you require any assistance with your own savings, finances, ormortgage arrangements, please do not hesitate to contact us here at DCA Accountants.

NEW MORTGAGE RULES

The Central Bank’s much debated and often bemoaned stricter mortgage rules were finally officially announced last month and officially put into place only last week.

 

Under these new tighter guidelines first time buyers appear to have business as usual as they can continue to apply for a 90% mortgage up to a limit of  €220,000. Anything above this limit will be subjected to the new 20% deposit requirement. Given that the average house price in Dublin is approximately €269,000 (according to latest published results from myhome.ie) it would seem unlikely that many buyers will escape the clutches of this requirement entirely.

Those looking to trade up on their existing homes will be entirely subjected to the 20% requirement for the entire sum of their loan which has caused concerns that many young couples and families may find themselves ‘locked out’ of the property market or, having already taken a step onto the first rung of the property ladder in easier financial climates, may find it impossible to take the next step, or fall off completely.

 

There will also now be a cap on the amount that can be loaned, something that banks and mortgage lenders previously had left to their own discretion. This sees lenders being restricted to only borrowing 3.5 times their income. Given that there is massive disparity between wage scales across various sectors, this rule would seem to leave those in lower earning sectors out in the cold.

 

It was reported last week that banks have been urging mortgage defaulters to seek a familial ‘dig out’ to help them meet their mortgage repayments.  These new tightened mortgage rules could now see buyers returning to the ‘bank of Mum and Dad’ model of purchasing in order to meet the deposit demand. It was recently reported that the Credit Union will be willing to allow parents to borrow significant amounts to assist with their children’s deposit as the prospective buyer themselves would be unable to take out a loan.

 

As the Capital Acquisitions Tax on gifts currently allows an un-taxed amount up to €225,000 we may well expect to see these rules also tightened. As it stands, without the addition of a parental gift the average couple can expect to be saving for at least four years to meet their deposit requirements for first time buying, whilst those trading up may well be reliant on these so-called ‘dig outs’ when they have outgrown their current dwelling.