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Thousands of homes targeted for seizure by banks
BANKS have initiated legal action to repossess thousands of houses and apartments, it has emerged.
This is despite a loophole in the law blocking repossessions.
A new report estimates that lenders have issued legal proceedings to take properties off up to 44,000 borrowers.
These are made up of residential and buy-to-let properties, according to calculations contained in a new report by Davy Stockbrokers.
An analysis estimates that what it calls non-cooperative borrowers number between 23,700 and 43,700.
FEARS
Letters threatening legal action have been sent to these borrowers.
And there are fears that large numbers of properties, particularly buy-to-lets, will be repossessed.
Legal action to repossess properties has been taken by both AIB and Bank of Ireland in around one in five of arrears cases, according to the report by Davy‘s Conail Mac Coille.
Ulster Bank said that up to a third of its property owners in arrears were making no payments at all. The bank said it would not hesitate to repossess in these cases.
Strong demand for family-type homes and the presence in the market of large numbers of cash buyers mean that a flood of newly repossessed properties can be absorbed.
A number of banks were also likely to keep repossessed properties on their books, take the rental income and slowly release them on the market, Mr Mac Coille wrote. Changes in the law to restore the right of lenders to repossess properties have been passed by the Houses of the Oireachtas and are expected to become law soon.
Davy reckons that arrears will keep rising this year, with large numbers of homeowners struggling to repay largely due to income decreases rather than job losses.
Two-thirds of those in arrears are in a job, according to comments by Central Bank governor Patrick Honohan.
For large numbers of borrowers in trouble the mortgage repayments are so high they represent more than half of their income, Davy reported, citing unpublished Central Bank studies.
A separate MABS (Money Advice and Budgeting Service) report found that distressed borrowers had just €777 a month left, after paying for utilities, food and childcare. But the mortgage was around €500 a month.
SPLIT
Banks will have to write down up to €11.5bn of mortgage debt. Most of this will be in the form of split mortgages where part of the mortgage owed is put to one side, and in most cases will probably have to be written off at the end of the mortgage term.
But one-third of borrowers are in such a bad financial position that a debt writedown will not work. These are mainly buy-to-let investors.
Half of investor mortgages are paying interest only. Despite this, almost 30,000 out of 150,000 buy-to-let mortgages are in arrears.
Irish Independent
via Thousands of homes targeted for seizure by banks – Independent.ie.
Here’s how to protect your bank deposits in this unsettled economy
IF THERE IS one topic that I get asked questions on more than any other it is in the area of bank deposits, the Deposit Protection Guarantee Scheme (DGS) and Deposit Interest Rates. The first answer I always give is that we should worry about the areas we can control, and ignore things that we cannot control.
Reading and discussing economic and investment updates seems to have replaced past discussions on property values and everyone seems to have an opinion on the Bank Guarantee, Euro Stability, Yen Devaluation and German Government Bond Yield. In reality, the investment world is very simple, but investment managers, stockbrokers and economists make their living from selling fear, greed and excitement in equal doses!
€150 million is on deposit in Irish banks
To set the scene, there is over €150 billion on deposit in customer deposit accounts in Irish Banks as of February 2013. This figure has been steadily falling ever since the banking crisis began in the summer of 2008, but is still a significant figure.
At that time, the Irish Government introduced the Eligible Liabilities Guarantee (ELG) which covered all deposits and some bonds in Irish covered institutions, in their entirety. I won’t cover the merits or otherwise of this blanket guarantee, or whether they were forced into it by higher powers. However, the ELG did give Irish depositors some comfort that all of their hard earned savings were fully guaranteed by the Government, and at the end of the day, the European institutions.
This comfort was taken away at the end of March when the ELG expired and we reverted to the historic guarantee. This guarantees €100,000 per institution. Therefore any individual who has a deposit with a covered institution with a balance under €100,000 can take some amount of comfort in a government guarantee.
If you’re lucky to have over €100,000, you should protect it
This does cause some confusion for individuals with multiple accounts, as the guarantee is per ‘institution’ not per account. For example, if an individual is lucky enough to have a savings deposit with AIB for €100,000, and also a portion of their pension on deposit with AIB for another €150,000, these accounts are taken in aggregate and only €100,000 of the combined balance (€250,000) is guaranteed)
Most sensible individuals are now rightly worried about the security of their cash and how to mitigate all the risks associated with savings and investments at the moment.
While I don’t personally believe the European Institutions or the Irish Government will default on their guarantee, recent news in Cyprus has, at least partially, brought this possibility into focus. It is clear that spreading deposits around the guaranteed banks and keeping exposure to any one bank below €100,000 is the obvious way to reduce this risk to a minimum
The threat to people’s deposits
Since banks have had some success with recent bond issues and seem to be stabilising, deposit rates have fallen significantly. There were wide spread offers during the summer of 2012 for 5 Year Fixed Deposits earning over 5 per cent. The best rate on the market as of the time of writing is now 2.75 per cent (excluding specialist accounts with Danske Bank).
This return, after DIRT is deducted, will only just beat inflation and I see this as being a larger threat to people’s deposits over the long term than any short term default risk. However, inflation never gets the headlines and is an invidious threat which is hard to understand in the short term.
The only true way to protect you from risks is to be widely diversified across a whole range of asset classes. €150 billion on deposit in Ireland would indicate to me that we are over-invested in cash at the moment, just as we were over-invested in property and Irish Equities in 2007.
Diversifying is the only way to protect your cash
In the long run, well managed and well protected portfolios never have too much in any one asset class. I would recommend assistance from a professional (ideally from a Fee Based Financial Advisor) before deciding exactly how to invest in a widely diversified portfolio but it’s the only way to truly protect against all the threats to our wealth and wellbeing in the current economic environment.
My biggest fear for Irish Investors and any of those individuals sitting on large deposits is that as the interest rates keep falling, they will become more and more restless. Equity markets have been on a fairly steady bull run since the market bottom in March 2009. The US indices are at or above all-time highs and this strong short term past performance might tempt some of these depositors to finally leap back into the markets.
I don’t know what is going to happen, but I would be nervous about equity markets at their current valuations and can easily see a correction in the second half of 2013. As markets keep going up, the risks of this correction keep getting larger and I just hope Irish depositors don’t’ get caught out by the markets again.
In summary then, the only way to reduce risk is to diversify. At a minimum this diversification should be across all the guaranteed banks, and for funds with a long term focus, diversification into other asset classes is ideal.
David Quinn is the Managing Director of Investwise.ie. Established in 1988, Investwise is the trading name of Fitzpatrick Morris Financial Services Limited. With years of experience in the financial industry, they offer independent services and advice on a range of financial matters.
via Column: Here’s how to protect your bank deposits in this unsettled economy.
via Column: Here’s how to protect your bank deposits in this unsettled economy.
The Ten Commandments of Eurozone Membership (for small states) | Brian M. Lucey
The quite wonderful Gavin Kostick of Fishamble Theatre has a comment on Irish Economy which is too good to linger there… It’s super.
And Draghi came down from the mountain with two tablets of stone.
(1) Thou shall love the god of the market. Thou shall have no other god before it.
(2) Thou shall have no other engraved image except the Euro. There shall be no other image on thy coin, for I run a jealous central bank
(3) Thou shall not take the name of the Euro in vain or speak slightingly thereof, for those who seek to destroy confidence will not be held guiltless.
(4) Thou shall work all of the days, excepting none, for this is the will of the free market. And you shall remember that you are a debt slave as you once were in Egypt.
(5) Honour Germany and France and the contract they made in their betrothal at the altar of the European Coal and Steel Community: for these are your mother and father to whom you must be obedient.
(6) Thou shalt not kill the bondholders.
(7) Thou shalt not commit adultery with other nations, neither the Russians nor the Chinese, nor any other nation against which we set our face.
(8) Thou shalt not steal deposits with high interest, low tax or any other wiles against which we set our face.
(9) Thou shalt not falsely accuse the ECB of running a tyranny, or threatening to implode your banks, being subservient to German interest, nor any other false witness against them.
(10) Thou shalt not covet a living possessed by your neighbours, but rejoice in the purification of your impoverishment.
via The Ten Commandments of Eurozone Membership (for small states) | Brian M. Lucey.
via The Ten Commandments of Eurozone Membership (for small states) | Brian M. Lucey.