Revealed: mortgage switch savings reach €3,400 a year

Beat the banks: Home-loans gap has widened by almost €900 in past year

Thousands of homeowners are needlessly overpaying their banks because of their failure to switch mortgage lender.

The cost to the average mortgage holder has now reached €3,400 a year - a rise of almost €900 since a year ago.

The Irish Independent Mortgage Switcher Index calculated the potential savings, based on the spread between the highest and lowest interest rate on the market.

It found that the gap between the current available rates has grown to 2.2pc.

Over a month, this amounts to a saving of €281 for the average home mortgage, according to the index produced by switching platform Doddl.ie.

There is a golden opportunity to switch as homeowners have risen out of negative equity, so common during the recession, while Central Bank rules have made switching easier.

Some banks are even offering cash lump sums to switchers.

Switching rates has increased lately but many homeowners are still reluctant to move their mortgage to a different lender.

Some are unaware they can switch, with others fearful something will go wrong.

But experts said the reluctance to switch was costing homeowners dearly.

The Mortgage Switcher Index highlights the huge difference between the lowest and highest interest rates on the market.

Variable rates as high as 4.5pc are being charged to homeowners, but rates as low as 2.3pc are available.

Discounted mortgage rates have been ignored by the experts who compiled the index.

The managing director of Doddl.ie, Martina Hennessy, said a typical homeowner on a 25-year mortgage is paying €1,335 a month.

This same homeowner could cut their monthly repayments to €1,054 by switching. This would give an annual saving of €3,372 a year - which is about the same as the average monthly salary for an Irish worker.

For a family with a larger mortgage of €300,000, annual savings of €4,200 can be made.

The rate of mortgage switching has more than trebled in the past four years, Ms Hennessy said. But she added that thousands more homeowners could benefit from making the move.

She said just 5pc of mortgage loans at the end of 2015 were switched. This had jumped to 14pc at the end of last year.

"Consumers are becoming more aware that switching can save them money, mainly thanks to Central Bank requirements on lenders to make mortgage switching easier," said Ms Hennessy.

She added that property values have increased. This means loan-to-value ratios have gone down, also making it easier to switch.

Many lenders have tiered rates, with lower interest charged for those with lower loan to values.

And many banks provide a lump sum amount to help defray the cost of the switching, such as conveyancing fees. The banks call these switcher packs.

"These switcher packages range from value €1,650 to up to 3pc of the mortgage amount outstanding back in cash.

"The easier it becomes to switch, the more people will realise that they are not tied to one financial institution if there are better rates on the market," Ms Hennessy said.

The launch of the new switching index comes at a time when banks are continuing to cut their mortgage rates.

Permanent TSB became the latest to give borrowers a break. It has reduced its fixed rates for new customers and those switching to it.

Ulster Bank this month reduced some of its mortgage rates, ICS Mortgages launched into the residential market, with some of the lowest rates, and KBC last month cut its rates.

It comes as the European Central Bank piled pressure on banks in the eurozone to lend more to homebuyers after it reduced the interest rate it pays banks that deposit money with it.

This is a way to force banks to lend more, instead of depositing money with the ECB.

Almost half of properties snapped up by cash buyers

 

Almost half of all the residential properties bought last year were purchased with cash or savings.

Some 25,000 properties were bought without the need to take out a mortgage.

This was not far off the level in the recession years, when numbers approved for a mortgage fell to an all-time low.

A total of 55,000 homes were bought last year, according to the latest quarterly Consumer Market Monitor from the Marketing Institute of Ireland and UCD Michael Smurfit Graduate Business School. This was an increase of 8pc on 2017.

Almost 25,000 were bought with cash, a figure which represents 45pc of total transactions.

Author of the report, Prof Mary Lambkin, said the numbers who were able to buy with cash was similar to the 2009 to 2013 period.

"In the absence of mortgage finance, almost half of the homes purchased relied on cash and savings, similar to the recession years when mortgage approvals were at an all-time low."

Separate research from the Central Bank last year found cash buyers more likely to snap up cheaper properties than dearer ones.

This meant modest homes are seeing the biggest price rises.

This is mainly because cash buyers are more active in the lower-end of the housing market, pushing up prices of smaller homes in less desirable areas.

This means there is a limit on the ability of the Central Bank's lending rules to control prices, a study by economist Edward Gaffney found.

Cash buyers include corporates and non-government agencies.

They also include householders using equity from their home, or a bank deposit, to finance the purchase of a buy-to-let.

The Consumer Market Monitor found the property market is growing, but the report shows the number of homes bought last year was about half the amount purchased during the height of the last boom in 2005.

Back then some 105,000 homes were sold.

Last year saw an increase of 12pc in the number of mortgages issued, with 30,629 drawn down.

This is way down on the 85,000 mortgages issued in 2005. The monitor also showed that while market growth was sluggish, demand remains high for housing.

Prof Lambkin said supply was failing to meet demand for properties, because 35,000 new homes are needed every year.

Over the next decade some 350,000 new homes will be needed to satisfy demand.

"The consumer economy is performing well in most areas, but the residential property market is still lagging behind.

"There were 55,000 homes sold in 2018, an increase of just 8pc year-on-year, a rate of growth that has remained consistently low over the past five years.

"This compares to the boom years of 2005-2007 when over 100,000 homes were sold each year."

Prof Lambkin said the property market's sluggish growth does not reflect the large increase in the working population and the rate of new household formation over the past five years.

The number of homes for sale has increased to approximately 23,500, but the level of property sales should be about double the current level.

The report said 15,000 new units were built in 2017, 18,000 in 2018 and another 20,000 and 23,000 new homes set to come on stream this year and next year.

The report said there would be 2.35 million housing units in the State if the needed 350,000 new housing units are built over the next year.

Irish Independent

Positive Developments for Tramore

The future of Tramore’s town centre has a much more positive outlook as we enter 2019 after a number of important developments during 2018. The most significant of these was the announcement last month of €1.35 million in Government funding for public realm works which will help revitalise the town centre. Works will include new hard surfacing, stone paving, upgraded lighting, new street furniture and landscaping for the areas around Main Street, the Square, Broad Street, Strand Street and Market Street. The plans also include changes to traffic circulation and the introduction of shared space areas. The hope is that this area, in the heart of Tramore, can be used for artisan markets, open air gigs and generally as an attractive meeting area in the town centre.
Whilst it will be 2020 before we see these works commence, in the meantime Waterford City & County Council have been investing €100,000 on remedial works on the Old Railway Station building after acquiring it last year from NAMA. These works will make the building structurally sound and thus enabling it to be used for possible community enterprises into the future.
Behind the Old Railway Station the site that was once occupied by Celtworld has been acquired by Aldi after they were granted planning permission by An Bord Pleanala. Whilst an Aldi might not be everyone's ideal venture for this location the reality is that without their acquisition of the site the probability was that the site would remain derelict for the considerable future. An Aldi store in this location will clean up the area and bring badly needed footfall to that end of the promenade.
In another positive signal for the future of Tramore, two hotels which we were lying idle for years changed hands during 2018. The old Tramore Hotel located at the top of Strand Street was sold at auction and Property Partners Barry Herterich negotiated the sale of the Waterfront Hotel at the bottom of Gallweys Hill to Seamus Walsh, owner of Waterford Castle Hotel. The Waterfront will open in the coming months and will have one of the best beach front terraces in the country. Whilst Mr. Walsh is prepared to invest in Tramore, unfortunately the same cannot be said of the owners of the Grand Hotel despite a Dereliction Order notice on the property.
Property Partners Barry Herterich also negotiated the sale of The Victoria House on Queen Street last year and it was great to see 'The Vic' buzzing over the Christmas period. Queen Street will also benefit from the opening of the Copper Hen restaurant, Fenor's loss is certainly Tramores gain. Finally 2018 saw the end of Tramore Chamber of Tourism and Commerce after it integrated with Waterford Chamber. I would like to take this opportunity to thank all past Board members for their contribution to Tramore Chamber. The decision to integrate with Waterford is also an indication that Tramore is upping it's game. The future looks positive for Tramore town centre.

The way we buy and sell houses is about to change

All property title queries will be dealt with and resolved in advance of contract signing

From January 1st, 2019, the buying and selling of houses and other real estate will move to a pre-contract investigation of title (PCIT) system. This will mean that all sellers, through their solicitor, will need to produce title packs pre-contract. Buyers’ solicitors will need to investigate title pre-contract. The benefit of this change is that all property title queries will be dealt with and resolved in advance of contract signing. Buyers will still need to take extra care not to sign a contract, by private treaty sale or by auction (whether online or not), before getting independent legal advice.

This new system will be more efficient and cost-effective as we should see a reduction in the duplication of work and effort. Subject to availability of finance, the time frame between contract signing and completion of a property sale may also shorten. We should also see borrowers engaging earlier with their lenders to ensure they are satisfied with the title being offered as security for the borrowings before the contract is signed.

Statute of Frauds

Over the millenniums there have been countless dealings in land in various forms. In 1667 the Statute of Frauds required that a contract regarding land be evidenced in writing. Deeds, as the instruments documenting and effecting land transfers, became the basis of the proof of one’s ownership. A system of registration of deeds was established in the 18th century and in the 1960s a registry of land ownership was set up in Ireland.

The vast majority of land transfers (or conveyances) have been effected on foot of investigation by buyer’s solicitors of seller’s deeds. Until recently a deed to the seller that was 20 years old or more constituted the point from which a buyer should start the review. By change of law, in 2010 this period was reduced to 15 years. This has the effect of reducing the number of documents to be produced by the seller to prove title and the extent of a buyer’s title due diligence. In 2011 it became compulsory to register ownership of all “unregistered land” in the Land Registry; however it will be many years before the register is complete.

In 1976 the Law Society of Ireland published the first edition of its “standard” land contract for sale. The standard contract has evolved over time and it has been used in the vast majority of conveyancing transactions since. While certain title warranties are provided for, ultimately the principle of caveat emptor (let the buyer beware) underpins it. What that means for the buyer is that he or she has to investigate the title during the conveyancing process. If, ultimately, there is something wrong with the title, the buyer has limited recourse to the seller.

Two-stepped process

Like in many countries, our conveyancing system is a two-stepped process. The first period leads to the signing of the contract. The second period that follows leads to final completion. “Completion” is the point at which the title formally transfers across. The main reasons for the two steps are to give the seller the time to produce the copy title documents and to give the buyer the opportunity to review them. The origin of the former is largely related to the bygone difficulty of document production and transmission.

It is easy to forget how much used to be involved in copying and transmitting information in hard copy before the current digital age. Immediately before the photocopier, handwritten deeds were copy typed, whereas now scanned copies are emailed or posted to online “data sites”. So, the practice was (or rather, is) that the seller would only evidence the title after the contract was signed. This process could only work if the standard contract permitted, as it currently does, the buyer to get out of the contract if the title, on investigation post-contract, is defective. Among the many difficulties with this approach, is that disputes about what is good or defective title are not uncommon and running a dispute when parties are “in contract” can be costly. Obviously, document production and data sharing has moved on considerably, so it was perhaps inevitable that a different approach would begin to take a hold in practice, as it has.

Change of system

Taking notice of these changes, in 2016 the Law Society surveyed the solicitors’ profession on the potential for a move to a PCIT system. A clear majority of those who responded expressed favour for the change. Many practitioners said they were unhappy to leave title due diligence to the post-contract period, and pointed to the inefficiency in the current system of addressing pre-contract inquiries, only for many of the same queries to be raised again in the post-contract title investigation.

The PCIT approach has long been a feature of the new homes market and in higher-value transactions. In recent years receiver sales have been similarly structured; so the solicitors’ profession is familiar with this approach. The buyer market has engaged well with it where used; buyers have shown a clear willingness to undertake title investigation in advance, without the security of a contract for sale. More generally, it seems that sellers are more willing to and they have better practical ability to produce title documentation pre-contract.

Having regard to these factors the Law Society’s conveyancing committee decided to adopt the change fully. The forthcoming 2019 contract for sale addresses this by entirely changing the conveyancing system to a PCIT system.

Title issues

The new system will also advance any disagreements on title issues. If the buyer and seller are not going to see eye to eye on title issues, it is better that this conclusion is reached before they have become bound by a contract. This approach should lead to overall cost and time savings on post-contract wrangling and potential litigation. It is far better to end the coupling during the engagement rather than after the marriage contract, if you pardon the analogy.

Michael Walsh is partner and head of property at ByrneWallace, Dublin, and he is a member of the Law Society’s conveyancing committee and convener of its pre-contract title investigation taskforce.

Fewer houses being bought as property prices continue to rise

FEWER houses are being bought as property prices continue to rise.

Prices were rose by 8.2pc nationally in the year to September, but the rises in Dublin have continued to ease off.

Economists said the surge in prices in the past few years and Central Bank lending limits are taking the steam out of the market.

The latest figures from the Central Statistics Office (CSO) also show a drop in the number of property transactions.

The CSO said 3,821 property transactions went through in September, down almost 300 from two months previously.

Dublin recorded the lowest level of price growth for almost two years.

Prices rose by 6pc in the capital, the CSO said.

The strongest price rises were in the mid-west region, with prices increasing by 21pc in the last year.

The Border region showed the least price growth, with prices increasing by 5.8pc.

When it comes to Dublin the largest increases were in Dún Laoghaire-Rathdown with price growth at 8.3pc.

In contrast, south Dublin recorded the lowest with prices rising by just 4.2pc.

The median, or middle, price for a property nationwide at the moment is €255,000, up €5,000 in the last month.

Irish Independent

Unwanted new records as rents surge 30pc higher than during Celtic Tiger

Rents have risen 30pc above Celtic Tiger rates and reached a record high for the 10th consecutive quarter, according to a new report.

The findings by Daft.ie don't expect the rental hikes to stop any time soon.

Nationally, there has been a rise of 11.3pc on last year, with the average monthly rental cost coming in at €1,334.

Rents in Dublin are 10.9pc higher than last year.

In Dublin the average rental price for a one-bedroom apartment ranges from €1,215 in north county Dublin to a high of €1,981 in Dublin 4.

Limerick and Waterford city have each seen a jump of more than 16pc in rental costs for a the likes of one-bedroom apartment. Meanwhile, the rental cost for five-bed homes in these cities are 26pc higher than 2017.

Rents in the capital are now 36pc higher than they were at their previous peak.

Daft.ie economist, Ronan Lyons said: "A problem that started to emerge nine years ago in Dublin has not only not been resolved, it has spread to the rest of the country".

Once again - for the 25th consecutive quarter - rents have risen. Once again - for the 10th consecutive quarter - both a new record high for rents has been set and the year-on-year rate of inflation is above 10pc," he said.

Mr Lyons said the reason rents were rising countrywide is "because demand far outstrips supply". He said the country needed to build far more homes than it was currently and that these should be predominantly urban apartments, based on the research.

The report found that the average market rent has risen by some 80pc in the past seven years, since it bottomed out in in 2011.

Irish Independent

Couples earning up to €90,000 may avail of new affordable housing scheme after Budget

House-hunting couples who earn up to €90,000 a year may be able to avail of a new affordable housing scheme after the Budget.

Fianna Fáil is demanding the introduction of an affordable housing scheme which will see homeowners enter into a shared-ownership arrangement with local authorities.

The scheme, which is central to Budget negotiations, will see local authorities buy houses from developers before offering them at significantly subsidised rates to first-time buyers. Local authorities will retain a stake in the properties until the home is sold or bought out by the property owner.

The scheme will be targeted at people earning between €30,000 and €90,000.

It is envisaged that Dublin local authorities would subsidise houses by as much as 50pc under the scheme which aims to provide houses priced between €160,000 and €200,000. Fianna Fáil is insisting on the scheme being introduced next year to ensure there is no delay in the roll-out of affordable housing.

The party is also proposing a more comprehensive long-term affordable housing scheme that would involve local authorities building new homes. This would see €200m earmarked to build 4,000 affordable houses.

The two schemes form the backbone of Fianna Fáil's demands ahead of the final budget of the confidence and supply arrangement.

Fianna Fáil housing spokesman Darragh O'Brien, along with the party's budget negotiator Barry Cowen, yesterday met Finance Minister Paschal Donohoe and Housing Minister Eoghan Murphy to discuss the proposal.

A Fianna Fáil source said it was "making slow progress" on affordable housing but insisted the two new schemes are at the centre of its budget demands.

Fine Gael and Fianna Fáil will meet over the coming weeks to determine how much funding is available for social housing.

Irish Independent