The European Commission still doesn’t appear to have any written approval of the NAMA mortgage scheme on its website, but regardless, NAMA has this morning announced that it is now open for business with its negative equity mortgage product, or as NAMA calls it the “80:20 Deferred Payment Initiative”.
Here are its features
(1) It’s open to most buyers of residential property, both first time buyers and movers but NOT investors/Buy to Let
(2) It’s initially available on 115 houses in 12 developments in Dublin, Meath and Cork
(3) It’s available from AIB, Bank of Ireland and Permanent TSB
(4) You’ll be protected against declines in the value of your property of up to 20% over a fixed five year period
(5) You’ll need a 10% deposit for your home
Separately Permanent TSB has this morning confirmed that it will be offering its 80:20 mortgages at 3.69%. So how will it work? Here’s NAMA’s illustration and NAMA advises that you consult the FAQs on its website as well.
Although this will be widely known as the NAMA 80:20 mortgage, NAMA is keen to point out (1) NAMA doesn’t own the houses, the developers do (some may eventually be controlled by receivers, but the point stands, it’s not NAMA that you’re buying the property from) and (2) NAMA doesn’t provide the mortgage, PTSB, BofI and AIB do.
According to the NAMA press release, the NAMA CEO Brendan McDonagh said this morning “Based on market research which we have carried out, concern about potential decreases in house prices in the future is a significant factor for house buyers in the current market. We are piloting this initiative to allow some buyers, who are putting off their purchase in the expectation that prices may fall further, to buy now with the knowledge that they may not lose out even if the value of their home falls by up to 20% over the next five years. Together with initiatives introduced in the recent budget, we believe that this measure will help encourage greater activity in the housing market”
There is a similar product on offer from IFG in Ireland which was reviewed here last year, but please don’t take it as read that the products are identical.
UPDATE: 8th May, 2012. More detail is emerging about the scheme.
(1) It is initially applying to 115 homes with asking prices of €30m or an average of €260,870 which is considerably north of what average homes cost in the State at present (less than €190,000 in Dublin, and less than €160,000 nationally)
(2) The asking price is not negotiable. NAMA chairman Frank Daly is reported as saying there will be no haggling “Chief executive of Nama Brendan McDonagh said the State agency would not haggle with buyers as the 115 houses were already priced at a “fair value”.” reports the Irish Times
(3) The asking prices in two locations represent 61-80% declines from peak asking prices reports the Irish Times.
(4) The scheme may be rolled out to 750 homes worth an average of €200,000 apiece or €150m in total.
(5) According to NAMA chairman Frank Daly, the European Commission is okay with the scheme – “The commission was “very comfortable” with the plan” – there is still no decision available from the commission on their decisions webpage.
UPDATE: 11th May, 2012. With respect to the IFG product which was announced last September 2011, it is understood that this product has not in fact entered the market yet and IFG will be formally launching it next month. The company says that the product is “virtually identical to the NAMA product, except that it applies to all properties, new and second hand, and to all banks, whereas the Nama product is restricted to their own properties” Why hasn’t the company sold any product before now? It says “IFG has been educating developers, estate agents and other industry players by presentations and road shows in anticipation of the NAMA product been launched”