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Archive for March 3rd, 2010

As expected the Central Bank of Ireland have today published figures relating to mortgage arrears and as expected also and foretold by last weeks Sunday Tribune the figures have omitted those mortgages where householders have been forced to restructure.  The Central Bank said 28,603 mortgages were in arrears for more than 90 days at the end of December. 19,185 of these had been in arrears for more than 180 days. The Central Bank say there are 793,000 mortgages in the State with an oustanding blance due of €118.3bn – an average of €150,000 per mortgage. There are approximately 1,985,000 homes in the State which means that 60% are owned without mortgages.  Approximately 30,000 mortgages have been restrutured. How many of these properties will end up on the market as distressed sales?

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David McWilliams, the prominent arch-critic of NAMA, has criticised the government’s continuing support of Anglo Irish Bank and reveals that in addition to the €4bn given to Anglo from the National Debt “One of the biggest creditors of Anglo is the Central Bank, which has very quietly lent Anglo over €10bn under something called the “master loan repurchase agreement”. (It doesn’t want you to know about this by the way.)”. Hopefully more detail on the additional €10bn will be forthcoming from David, a man whose history in banking might mean he knows where some of the bodies are hidden.

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Didn’t we get it last Friday 26th February, 2010? No what we got then was the Statement. The Decision may not be available for several months according to media sources. Here is what the entry on the Competition Directorate website looked like this morning. Note the ominous wording:

“The public version of this decision is not yet available. It will be displayed as soon as it has been cleansed of any confidential information.”

To this author, it is reprehensible that Mr Lenihan is refusing to turn on his calculator to re-work the numbers following the Statement which did say there were to be changes to the valuation metrics. Are we looking at paying €54bn still or €47bn or indeed €38bn? These are giant differences and we deserve guidance at least – altering interest rate assumptions to counterbalance the EU changes is fooling no-one Mr Lenihan. Now Mr Lenihan says that the numbers will be available soon enough as NAMA transfers the actual loans and of course NAMA have been working intensively with the banks (so we are told) for the past few months getting to grips with the nitty-gritty of title, assets etc but given the sizes of difference we should be getting a revised overview – we are a democracy and despite the SPV attempt to bypass the national debt we understand this is our money.

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When it’s AIB’s who have announced that Standard Variable Rates will increase by 0.5% before Summer. Take a look at the definition of SVR on the AIB website

“Standard Variable Rate (SVR)
A standard variable rate generally rises and falls in line with changes in interest rates. When the ECB rate rises or falls, the mortgage lender can increase or decrease the variable rate passing on some or all of the rate movement.”

So despite the fact that no-one thinks the ECB will raise rates before the end of this year, AIB are going ahead anyway, it seems, to increase rates. ECB rates have been 1% since May 2009. Why are AIB increasing rates now (other than to restore profitability sooner)?

It is pointed out in the Independent story that SVRs would typically apply to less prime customers compared with trackers so it may be those less able to pay or more in risk of default that end up paying the most. What will this mean for mortgage arrears, repossessions and sale of distressed assets onto an already flooded market place? Of importance to NAMA, what will it mean for residential property prices?

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