Irish Financial Review

All treats and no tricks as AIB cuts interest rates

AIB is to cut mortgage rates by up to 0.25% from the start of December.

Mortgage market getting more competitive

Mortgage market getting more competitive

The standard variable and Loan to Value rate reductions will apply to mortgage from AIB, EBS and Haven and will be available to new and existing customers.

This is a really smart move by AIB as it seeks to position itself ahead of an anticipated mortgage rush before new lending rules take effect from January next. When it comes to choosing a mortgage, interest rates are king!” said Mr. Frank Conway of, the personal finance website.

The bank said the change would impact 146,000 existing mortgage account holders.

The cut will see the bank’s standard variable rate fall to 4.15% from 1 December, with EBS’ rate dropping to 4.33% and Haven’s falling to 4.35%.

Meanwhile Loan to Value rates at AIB and Haven will fall by 0.24%, with EBS rates falling by 0.25%.

This means that a LTV mortgage of 80% or more will be charged at a rate of 4.25% by AIB and Haven, and 4.2% by EBS.

This is a direct challenge to Bank of Ireland which led the market with its offer to pay the 1% stamp duty for first time buyer applicants, it would be a major surprise if BoI did not respond with a counter offer” said Mr. Conway

How to be a smart spender this Halloween season

October is a month of pumpkins and sweets – and it’s a time when “Trick-or-Treaters”, young and old celebrate this ‘scary season’ with lots of spending, all of which can really add up.

More treats than tricks this halloween season when it comes to spending

More treats than tricks this Halloween season when it comes to spending

Following are some handy tricks to make sure your ‘scary season’ celebrations remain a treat!
1. Trick-or-Treating
Trick-or-treating is a great time to show off your fancy costume and earn some serious sweet donations. But for items you’ll only use for a couple of hours, consider some budget-friendly alternatives.
Treat Bags. Stores stock shelves with plastic baskets shaped like pumpkins and other fun sweet carriers. But going back to the traditional pillowcase treat bag offers an opportunity to get creative, like dying an old pillow case or decorate it to match your costume. You might even find it will hold more sweets than a store-bought basket.
Sweets and Chocolates. In the case of Halloween treats, waiting until the last-minute just might work in your favour. Shops often lower prices to rid their shelves of Halloween sweets to make room for Christmas merchandise.
2. Halloween Entertaining
Whether you’re hosting a big party or going to someone else’s event, keep these tips in mind to make a big impression without spending big euro sums.
• Plan Ahead. Make sure you have all the costume materials, decorations and sweets and treats that you need on Halloween day to avoid last–minute splurges.
• Make a budget and stick to it. Like any holiday, there is the temptation to overspend during Halloween. You can set a realistic budget for your family in advance using our Personal Budget Planner.
• Reuse decorations. If you keep decorations in good condition, they can often last you for years to come.
• Get creative. Want to have the scariest looking house in your neighbourhood? Get your kids or friends involved in making decorations, so you don’t break the bank making the house look frightful. Construction paper, pens and a little imagination can go a long way.
• Get together. To help defer some of your holiday costs, plan a party with friends and family so you can share the burden (and the fun!) of hosting a neighbourhood bash.
• Shop clearance sales for next year. Enjoy significant savings on costumes and decorations by shopping just after Halloween this year for supplies you can use next year.
• Be safe. Everyone wants to have fun on Halloween, so when hosting an event, remember to keep the environment safe for children and parents alike.
3. Cost-Conscious Costumes
Whether you’re outfitting yourself or helping to dress up your kids, you don’t have to break the bank to have a ghoulishly good costume this Halloween. Here are a few time-tested tricks for saving yourself big-time.
Skip the store. Seasonal Halloween stores can be tempting, but purchases can really add up. Instead of visiting a specialty store to shop for your entire costume, get your costume elsewhere first and visit seasonal stores for accessories only.
Be thrifty. Cruise the bargain shops to look for accessories or the costumes you are creating. Whether it’s a princess, a superhero or a zombie, you can often find what you need at a second-hand shop. The price tag is likely to be less than €10 compared to €50 or more for a costume purchased at a specialty store.
Swap with friends. Kids don’t typically wear the same costume year after year. Consider getting together with neighbours who have kids the same age as yours and swap costumes from previous years.
Jump online. If you are set on the idea of getting a complete costume online, check out eBay’s Halloween store or other discount sites.

How to negotiate a better deal on just about anything

Best deals on a range of services

Negotiating to a better deal

Despite being told that Europe suffers from a state of near-deflation, one would be forgiven for thinking the opposite in Ireland. Just this week, bus and train fares are set to rise sharply, this the same week as millions of families are expected to register their details for new water services.
For many products and services, the price you see is the price you pay. However, sometimes, the costs are actually more negotiable than you think. Here are a few instances where you can save some money just by knowing what to ask.

While gym memberships can be pricey, they’re usually not fixed, which is why you should always negotiate your rates. Before you sign up, check online to find competitive prices at other comparable fitness clubs. Your gym will often offer to match those prices in order to get you onboard.

If they’re not willing to budge on the rate, try getting the initiation fee waived. Sales staff often have some flexibility when it comes to this, and will commonly waive the fee in order to lock in a membership.

Your cable and mobile phone rates are also adjustable. The best time to negotiate for lower prices is at the end of your contract, when companies know they’ll have to work harder to keep you from switching providers.

Check competitors offers to find out what promotion a service provider is offering new customers and ask if they’ll give you the same deal if you renew. If that doesn’t work, ask to speak with the cancellation team. These service agents are there to keep you from jumping ship, so they often have the most power to give you the best deals.

When it comes to electronics, you probably won’t be able to talk down the price of the latest iPhone, but you can save up to 40 percent on anything from flat-screen TVs to surround-sound stereos, if you know how to negotiate.

Brick-and-mortar retail outlets get a lot of competition from online retailers, so you’ll have a better chance at making a deal in person. For example, some retail brands allows managers to adjust prices to close a sale. Even if they can’t match a price, they can offer extras at no cost. Keep in mind, you’ll have the most bargaining leverage at the end of the month when stores are desperate to hit their monthly sales targets. This applies across a range of sellers, including cars.

So, when it comes to lowering bills or getting a great deal, polish up your negotiating skills. It’s not only what you ask, but how you ask that can make all the difference and with insurance renewal season just about to begin across Ireland, sharper negotiation skills can save you a bundle of your hard earned cash!

Beginning of end for Irish austerity

Michael Noonan has done the people a service. He has begun the process of rolling back the years of crushing austerity.

Beginning of the end of austerity

Beginning of the end of austerity

In a number of areas, Mr. Noonan and his team have taken important steps that sets the Government in a new direction.

In the area of pensions, confirmation that the Government will end the .6% levy is more than welcome. The introduction of the levy a number of years ago sent the wrong message to those who heeded Government calls to plan for retirement. Many complained that the levy was a penalty for being prudent; they had a point. Today, Mr. Noonan and his team have done the right thing by ending that punitive levy.

On DIRT, the decision to be imaginative is welcome. First time buyers always need assistance and the punitive 41% DIRT on what little income they were earning was sapping, today’s announcement ensures that prudent savers preparing to buy a home are helped instead of hindered.

Other measures announced by Mr. Noonan and his team are also positive, including changes to USC, water charges relief and reduction of the 41% tax rate to 40% means that while this is not a giveaway budget, it is not a takeaway one either.

Overall, it is the direction of this Budget that matters. After such a prolonged period of austerity that sapped the finances of families up and down the country, the beginning of the end of crisis in the State finances is finally emerging.

Mr. Noonan and his team may not be the most popular guests at the Christmas party, but beginning this year, it appears that they will again make the guest list and that is a big improvement!

Financial training for professionals and managers

Senior managers in well-known brands do not always have a fundamental grasp of key financial terms. I discovered this earlier this year while completing a graduate programme.

Business is a game and the method by which the score is kept is through finance and managers that do not understand how the score is kept are putting themselves at a serious disadvantage.

Financial Training for Professionals and Managers

Financial Training for Professionals and Managers

One common mistake made by managers is that finance is accounting, which is not accurate. Accounting does prepare books but accounting prepares the historical books of a company, by their nature they look back. Forward projections is where finance comes in.

Understanding and disseminating financial statements poses a challenge to some managers, especially if they graduate up the company hierarchy from a non-financial background.

Managers across company hierarchies should know key terms, including NPV, IRR, CBA, Time Value of Money and much more.

The reason for this is simple, their careers require it, especially if they hope to progress. For managers seeking funds for projects and future growth, as part of ‘lean’, capital budgeting is a must!

I have developed a programme for professionals and managers where they can learn to master a broad range of key financial terms.

I have also made a lot of interesting discoveries along the way, including some of the fears professionals and managers have of finance, many of which are irrational but powerful. For example, one manager with a PhD in a senior position was so afraid of “making an a**” of themselves, it was simply easier to not ask questions. Little wonder they never spoke up when they had legitimate questions on important trends.

Finance is not complicated…it has simply been constructed to appear so. With the right tools and a little patience, anybody can master it.





20% deposits would have disqualified 87% of boom-time mortgage market

I just carried out a review of the mortgage lending market back in 2008 and ran some figures on the impact the proposed 20% deposit rules could have had on the market back then. What I was particularly interested in was the number of borrowers using mortgage credit in excess of 80%.

New rules on mortgages on the way

20% deposits proposed

First, looking at the overall new homes market, some 63% of all loans granted and drawn down exceeded 80% in the Dublin area.

Nationally, the figure was a little lower at 52%, perhaps borrowers were a little more prudent or lenders more cautious?

Examining the second-hand property market in Dublin, the percentage of loans greater than 80% LTV was 56% while across the entire country, the figure drops to 50%. Second hand homes incurred a significant stamp duty liability and so, were often avoided by first time buyers. Lenders reserved 100% finance for first time buyers only.

What is interesting about the overall mortgage statistics is when I look at first time buyer market in Dublin between 2004 and 2008, almost 9 in 10 mortgages (87%) had LTV’s that exceeded 80%.

The proposals on restrictive lending put forward by the Central Bank today are interesting, especially the 20% deposit.

One area it has not identified for reform is the actual loan terms such as loans that exceed 30 years in duration. As I teach students in my MoneyWhizz financial education classes, the longer one holds a debt, the less costly it appears to be but the more cost it actually is. This is a function of the time cost of money.

I believe that no mortgage should exceed 30 years as such loans create extraordinary artificial affordability and significantly increase the cost of credit to consumers through higher interest charges.

My main concern with the proposed 20% deposit rules is they may restrict the financially prudent, especially those whose mortgage repayments may actually be lower than their monthly rents.

However, while the direction that the Central Bank is now taking is the right one, it could go further in some areas. The stability of the banks must be weighed equally against the stability of consumers.

Frank Conway is the Founder of MoneyWhizz, the financial education and personal budgeting resource.

Central Bank must tread carefully on mortgage lending

In his speech last night to the UCD Economics Society, Governor of the Central Bank Dr. Patrick Honohan touched on a mortgage nerve; he referenced the possibility that the Central Bank is about to take a more proactive role in policing mortgage lending here.

Wants to prevent future bubbles

New focus on mortgage lending limits

Two areas singled out for special focus were the loan-to-value ratio and the debt-service-ratio. In other words, the amount of deposit one may be required to have when applying for a mortgage and the percentage of income the lender could use when evaluating their overall loan repayment capacity.

The Central Bank needs to tread carefully. While its overall direction is positive, it must ensure that it does not throw the baby out with the bathwater.

Loan-to-value ratios are an interesting beast. In the price ranges where the mass market congregates, it could be counter-productive to set possible deposit requirements too high. For example, if the Central Bank were to set 20% as an absolute, this could punish the financially prudent. For example, those that saved their deposits on their own and paid a significant rent while doing so may actually find it extremely difficult to accumulate 20% in an appreciating market.

Where the Central Bank should focus
In Dr. Honohan’s speech, there seemed to be a significant reference to restricting borrower activity and less focus on restricting lender activity.

Area of possible limits
There are 4 immediate areas where the Central Bank could have a significant market impact while protecting the long-term financial well-being of consumers:

1. Place a cap on lending terms – no loans on residential mortgages should be greater than 30 years. Presently, they are 35 years by the pillar banks.

2. Place a cap on interest rate limits – these should be annual and lifetime caps to protect Standard Variable Rate mortgages holders against excessive increases but sufficient to maintain a profitable margin for banks. These limits would ‘float’ above the ECB base rate.

3. Establish a Jumbo loan criteria and ‘waterfall’ against it with more restrictive lending , including loan-to-value limits of say 65%.

4. End interest-only lending – except as an emergency measure (for example in the case of mortgage arrears.
At the height of the property boom, 37% of all first time buyer mortgages were for 100% finance. Almost one-in-five were over 40-year terms and many first time buyers and property investors began their loan repayments on an interest-only basis, which created ‘artificial affordability’.



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