Irish Financial Review

Negative equity cemented under new mortgage rules

Under new Irish Central Bank mortgage rules, banks will only be able to lend up to a maximum of 80% of a property’s value in most cases.

Urges action on arrears

New mortgage rules will restrict lending

The new rules will not be phased in, and will have immediate effect once they have been approved by the Oireachtas.

However banks will be able to lend up to 90% of the value of the home to first-time buyers up to a limit of €220,000 but any amount above this threshold will be subject to the 80% lending cap.

This means that first time buyers will need a 10% deposit for the first €220,000 and 20% for any amount above this.

For all other owner-occupier borrowers, the deposit required will be 20%.

Return of Property Price Ceilings

What this all points to is price ceilings returning to the property market much like the old stamp duty ceilings on second-hand homes before the system was reformed.

Much worse for existing homeowners in negative equity

For existing homeowners, this is bad news as it now means that if they are currently in negative equity, the likelihood of they remaining there for a longer time has just shot up. Additionally, higher priced properties have suddenly seen their potential market shrink as fewer first time buyers or existing homeowners will have the necessary funds to buy them.

Of course, to be fair to the Irish Central Bank, it does not and should not owe higher house prices to anybody, that is not part of its remit. Its job is to ensure the stability of the banking system.

So much for ECB money printing experiment (A.K.A. Q.E.)

The reality on the ground though is that property prices really do matter; they have a major impact on consumer confidence. The irony of course is that in less than a week after the ECB said that it would start printing money in a desperate bid to boost economic activity (and consumer confidence) the latest mortgage rules here are likely to result in the opposite. After all, who really feels flush living with €60,000 of negative equity?

Who knows, perhaps there will be lots and lots of investors sitting on the sidelines ready to take up the slack!

Co. Councils could face mortgage surge following CB deposit rules

Frank Conway

The Irish Central Bank is shortly expected to announce its final decision on new deposit rules for first time buyers. So far, the Central Bank has signalled that it wants first time buyers to come up with a 20% deposit.



The new deposit rules will be enforced through retail banks which the Central Bank regulates and on that front, there will be little escaping the new rules.

However, sitting outside of the banking system is a little known Government-backed mortgage programme that could become the go-to place for first time buyers if the Central Bank goes ahead and tightens lending requirements as expected.

This little known programme is called the Home Choice mortgage programme and it works as follows:

It is a Government backed mortgage for First Time Buyers that is available through authorised mortgage brokers. It is provided nationwide by four designated Local Authorities.

First time buyers can apply for a Home Choice Loan to purchase a new or second-hand property or build their own home.

Home Choice Loan provides up to 92% of the market value of a property purchased. The maximum loan amount is €285,000.  The loan is a normal Capital and interest mortgage which is repaid on a monthly basis.

Home Choice Loan offers one variable interest rate. The rate is currently set at 3.70% variable (APR 3.76%).

To qualify for a Home Choice Loan applicants must:

  • be a first time buyer (some exceptions may apply );
  • earn over €35,000 as a single applicant and over €45,000 combined income as joint applicants;
  • be in continuous employment for a minimum of one year; If self-employed be able to submit two years certified accounts;
  • provide evidence via a broker that they could not obtain sufficient finance from two banks or building societies.

So there we have it, there is a Government-backed programme that can bypass the strict mortgage deposit rules about to be imposed on the retail banks by the Irish Central Bank.

It’s now going to be an interesting development if this Government-backed County Council lending conduit can become a lifesaver for highly prudent, qualified and deserving first time buyers.

In fact, during the Central Banks public consultation period on the new mortgage rules, there were some very reasoned and even passionate points put forward by Department of Finance officials, who argued and lobbied against the strict new rules. Perhaps the Department of Finance can use its power to provide that alternative funding vehicle to qualified first time buyers that it has argued so passionately for. First time buyers could do with the break!

5 Top Ways for Students to Earn Money

1. Get out - It can be tempting to sit on your laptop and search the web for a summer job, but the reality is you will need to burn some rubber and knock on some doors. There are lots of short-term summer jobs that never make it online. Your best means of reaching the person that you need to convince you are the right person for the job will be face-to-face.

Lots of ways for students to earn a little extra cash during their summer holidays


2. Freelance WritingFreelance writing is one of the most flexible summer jobs for college students. While you won’t earn much – high-paying jobs are usually reserved for established authors, experts in their fields and staff writers – you can make some cash. As a bonus, you don’t even have to get out of your pyjamas!
To get started, check out websites such as The Barefoot Writer or Freelance Writing. Be sure to determine your strengths before you begin applying. After all, there’s no point in vying for a job blogging about cars if your automotive knowledge doesn’t extend past paint colour.

3. Online surveys – An increasingly popular way for students to make money is to fill out online surveys in their spare time. Research companies are always recruiting new members to answer surveys and test new products. For a few minutes of form filling, you can make a couple of Euro (£ and US$ also) which is paid as cash or in rewards. A few good ones to try are: SurveyCompare, SurveyMonkey, IrishOpinions, MySurvey, IPSOS, Global Test Market, Harris Poll, New Vista, PanelBase, Valued Opinions, SurveyBods, Springboard, YouGov.

4. Mystery shopping  – Becoming a mystery shopper for a company can have its perks. There are a range of services that cover the UK and Ireland and while there is no age limit, mystery shopping companies typically seek parental agreement for those under age 18.

5. Teach  – Using a computer or social media is a given for any student nowadays but there is still a ‘digital deficit’ when it comes to some adults and senior citizens. Teaching adults the basics of using a computer, setting up a social media account or composing and email will not only provide real help but also be an opportunity to earn some cash, who knows, it may even spark an entrepreneurial side???

Frank Conway is the founder of, a financial literacy programme for students and young adults.

The parallels between success in running and personal financial planning

By Frank Conway

These are weeks of New Year’s resolutions where plans are made with the best of intentions all over the world.
Many plans focus on physical fitness while others focus on financial. On the physical fitness front, who doesn’t think about losing a few pounds or inches from the waist-line? The same is true when it comes to personal finance. Following the Christmas spending spree, many face sticker shock when the first credit card bills are slipped through the front door.

A plan of action is needed if one is to be successful

A plan of action is needed if one is to be successful

Personal financial planning and running have a lot in common. To be successful at both, one absolutely needs a roadmap, a plan to get from a state of good intentions to goal realization.
So, using some running tricks, the following are some basic tips to get you from thinking to doing and in the long-term, success to achieving your long-term goals, be they physical or financial:
1. Set your goal. This is the biggie. In running, you are finished before you even start if you don’t set one. Goal setting is paramount for running success. Whether it’s a goal to break the 4-minute mile barrier or complete the local running challenge, without stating this in advance, it’s near impossible to get there. The same is absolutely true for personal finance. Think about what you want financially and write your goal down. This may be little more than paying off that credit card bill or something a lot more demanding, such as setting up a personal pension plan. You must state your goal if you want to achieve it!
2. Develop a strategy. Now that you have set your personal goal, the next task is to develop the strategy to get there. This will require some time as you have to identify where you are now. When runners set their goals and develop their strategy, they will first identify where they are now. Even world class athletes must accept the extreme challenges they face when they simply switch events. Say for example an 800M runner plans to move up to the 1500M, they know that their training routine will need adjustment. Some athletes succeed, some fail but all use a personal strategy to achieve their goal. In personal finance, it’s important to map out the state of personal finance today. How much do you earn, how much do you spend monthly. How much disposable income (if any) do you have presently? Do you even know? So, if it’s paying off a credit card debt, setting up a college education fund or planning for retirement, where do you plan to squeeze that extra cash from your current budget to achieve your goal. TIP – use a simple personal financial planner to give you greater visibility of where you spend all of your money now. Use the one page Personal Budget Planner on the Irish Financial Review to get you started.
3. Devise your tactics – these are the means of implementing the strategy to achieve the goal. Runners for example may have a specific race they want to win and the strategy to get them there but how and when they race, what days they plan to do hard tempo runs, do their weekly long runs, the inclusion of ‘easy days’ these are all the daily actions that need to be mapped out and constantly adjusted in order to stay on track. The same applies to personal finance. How can you manage to pay off a credit card bill if your finances at present are very limited? In this case, you may decide to forego some little luxuries as a means of squeezing the extra cash from your family budget. One idea here may include running to work and leaving the car at home thereby cutting out some fuel costs. This is just one example of a means of achieving ‘little wins’ that can be employed to get to that big long-term win.
4. Prepare for setbacks. Running is one of those sports where injury can come often. But having a plan is a fantastic way of keeping the long term goal in play even if the short-term ones get knocked on the head. In personal finance, that car may need to be repaired and some of your scarce cash gets re-directed for a while. Not to worry, this is normal and as soon as the short-term hiccup is out of the way, you simply resume working on the long-term goal.
5. Allow time and remain committed. Runners that do not allow sufficient time to achieve their goals usually don’t. This is the very same in personal finance. You need to be realistic when you set your goals and allow sufficient time to get there. That pension plan won’t happen overnight, it will take time to grow and with investment returns always at the mercy of market conditions, there will be ups and downs. Equally, the credit card bill can very slow to pay down but over time, it WILL disappear!

Remember, set your goal, develop your strategy, devise your tactics, anticipate and prepare for setbacks, allow time, be patient and most important of all, remain committed!

Frank Conway is the founder of, the financial literacy and personal budgeting service that provides financial education specifically developed for students.

Quantitative Easing Impact on Main Street Explained

By Frank Conway

Across the Eurozone, we’re being told that the price of goods and services has been falling. Not a bad thing, especially now as those pesky post-Christmas credit card bills are being slipped our front-door letter boxes. Although I must admit that aside from fuel and my tracker mortgage, I struggle to name anywhere else that ‘deflation’ is actually having any material impact on my wallet.

Value of Euro about to be shredded

Will ECB QE shred value of euro and save eurozone economies


Falling prices are akin to running a slight temperature in the depth of winter; it’s usually a sign that something is wrong!
Deflation is a sign that an economy is in poor shape. Economists usually panic at first signs but then again, that is what economists do especially well, they panic!

The ECB likes a certain amount of inflation but only when it is less than 2% annually. Which brings us to the current QE debate. No, it’s not the Queen, its Quantitative Easing. Bit of a mouthful that really means printing money.

Quantitative easing is a monetary policy organised by central banks in an effort to stimulate the local economy. By flooding the economy with a more money, the ECB hopes to keep up artificially low interest rates while providing consumers with extra money to spend more freely.

Reasons the ECB Uses Quantitative easing

The ECB uses quantitative easing for a variety of reasons:

1. Foster maximum employment. The ECB argues that money printed through the QE program can be used to help create jobs for citizens across the countries that share the Euro since businesses should end up with more cash on hand to finance new hiring (that’s the theory at least, critics sometimes argue that the benefits are often only temporary).

2. Encourage lending. The general premise behind this claim is that central banks can reduce long-term interest rates by buying treasuries. In providing financial institutions with more cash, these institutions should be more willing to lend out money at lower rates. Such loans then act to further stimulate the economy through higher consumer spending and business development.

3. Encourage borrowing. Low interest rates tend to encourage increased borrowing. Although this can help stimulate the economy, some argue it also has the tendency to encourage customers and businesses to take on unnecessary debt (something that the Irish Central Bank is currently trying to prevent). At the same time, some level of debt and leverage is essential to the growth of any economy, especially across many eurozone economies, including France and Italy.

4. Increase spending. The theory is that as more money enters the economy, consumers will have more to spend. This will in turn increase company profits and create more jobs. Ultimately, these factors should result in newfound consumer confidence and an economic recovery.

5. Complement low interest rates. Another tool used to stimulate the economy is the ECB refi rate. However, this tactic has already been exhausted by the ECB and has had minimal impact on economic growth in many of the major eurozone economies. This is exactly why the ECB is now about to launch the big guns of QE.

A major factor behind whether QE will actually provide long term benefits will come down to how much of the actual money that is earmarked for consumer’s pockets actually reaches its final destination. Without consumer confidence and buy-in, the prospect for a sustained recovery will remain problematic.

Risks of Quantitative Easing

Quantitative easing is not a panacea for economic recovery and has even come under fire for multiple reasons:

1. It drives inflation (much) higher. This is the biggest concern around quantitative easing which is why there has been opposition in Germany to the idea. As more money circulates through the economy, prices rise. Why? While the supply of money increases, the supply of goods remains the same. Thus, the competition for each good increases more and more leading to increased prices, which in turn leads to inflation. Excessive inflation leads to distortion of prices and incomes, and can cause an economy to operate inefficiently.

2. It creates havoc with international trade. Newly printed money can be used by the government and consumers to import new goods and services from other countries. These goods and services are more or less coming in for free. But therein lays a new problem as the value of the currency (euro) to actually purchase those goods falls, confidence in the currency falls also…it’s a bit like watered down beer, a temporary trick that will usually backfire!

3. Threat to the international perception of the Euro. Many countries get frustrated with attempts at currency manipulation like quantitative easing. In fact, in anticipation of the impact, Switzerland only just abandoned its currency peg with the euro.

4. Benefits don’t outlast QE programs. When the central bank stops printing money, the recovery often gets put on hold, or worse, begins to reverse. Although the hope is that new consumer confidence will inspire a real recovery, many feel these programs are only a short-term fix. This effect is exhibited by the fact that stock markets often fall when it is announced or speculated that the quantitative easing program will be brought to an end (as happened in the US).

5. Encourages debt. Another key worry about quantitative easing is that the increased money supply and low interest rates encourage additional borrowing by both consumers and businesses. While some debt can help stimulate an economy, excessive debt is another matter as is the case in Ireland with many businesses and consumers still struggling to exit excessive indebtedness from the pre-bust days of the Celtic Tiger.

6. More problems. While quantitative easing programs can fuel the economy, they can also dig a common currency area into a deeper hole. The key to a successful QE program is to strategically implement it just long enough to promote real and lasting improvement. Unfortunately, the ability to do so is much easier said than done.

Final Word
Quantitative easing is a controversial topic for economists and politicians alike. Across the eurozone, there are many differences of opinion. Mario Draghi and his team have talked the QE game for a long time and the markets anticipate that he and his team are probably on the verge of moving ahead with QE in a massive way. This is probably why the Swiss national Bank (SNB) abandoned its currency peg. There is little doubt that the German authorities will have massive reservations about QE, after all, they are the major underwriters of the euro. For the rest of us, we’ll just have to sit tight and watch what unfolds. Will inflation return on the back of more money and if it does, what shape will the overall economy take. Will more cash mean more jobs, is this why the Irish Government moved its full employment projections forward by 2 years, who knows? Now for Mr. Draghi and his next act!

Swiss get tossed overboard in currency storm

By Frank Conway.

For the Swiss, it must been a mix of Lamont and lament. Norman Lamont of course was the UK chancellor for the exchequer at the time Britain crashed out of the ERM. And for those lamenting the SNB decision to abandon the currency peg ship, that includes Swiss tourism, Swiss chocolate (the authors favourite food) and those unfortunate enough to hold Swiss franc denominated mortgages (outside of Switzerland) and whose monthly repayments are about to skyrocket. swiss franc

The rise of nearly 30pc against the euro has been compared to an earthquake in the FX markets and comes little over a week since the Swiss were rubbishing claims that the peg was costing the SNB too much money. So much for central bank promises!!!

The Swiss National Bank (SNB) introduced the currency peg in 2011 in response to a major increase in its value against the euro. At the time, the move was deemed necessary to protect large areas of the Swiss economy which were (and continue) to be highly dependent on the EU market.

The Swiss dilemma is that of many countries that are highly dependent on exchange mechanisms for one reason or another, in most cases, they just simply break as would a string tying together two uncontrollable ships in a violent storm.

The Euro area is at a significant cross roads. On one hand, the path for QE has been set for some time by the very clear signals from the ECB. However, the lack of concrete actions to date and speculation that some ECB council members are reluctant to go down the QE road is raising concern.

German officials have been traditionally opposed to the QE toolkit while other countries are very much in favour. And while the ECB is nominally politically independent, the fact that the euro and by extension, the ECB are the product of a grand political vision, politics invariably seeps its way through the doors of the ECB Governing Council. At a minimum, the members of the council must surely take stock of what the political leaders are saying, thinking and perhaps even asking.

The Swiss simply got run over by the ECB bus. They got caught in a currency war that they had little chance of winning. And the winners of course are those that produce euro denominated exports. Inward tourism to the euro area should also fare a lot better as the value for money has become far, far better than what was on offer 12 months ago.

So now, we wait for the next move from the ECB, QE or not QE…that is the question!

Taking positives from the euro collapse

The euro is getting hammered. In recent weeks, as investors increasingly expect that the ECB will begin QE, the value they place in the single currency has slid, and the exchange rate shows as much. Within 6 months, the value of euro has been taking a severe beating and there is little sign that the trend is about to reverse significantly any time soon.

Euro slide

Across the eurozone, major economies are in economic stagnation. Deflation, that big sign that all is not well has been popping up more and more in the conversations of economists and the figures of statisticians. The eurozone economy is sick and the ECB has been delaying taking actions to reverse the trend, or at least, it is so far refusing to take the action that it has hinted it would for so long.

The impact on the value of the euro has been extraordinary with its dollar value dropping to $1.1753, the lowest since Dec. 8, 2005, before recovering to trade at $1.1773

Investors have voted with their wallets and this has pushed down the value of the single currency by 16% from its 2014 high of $1.3995 reached on May 8.

Not a football game
The good news of course is that a weaker euro makes goods manufactured within the single currency area far cheaper in the US. German car manufacturers, French cheese and wine producers, Spanish meat producers, Italian fine goods manufacturers and Kerrygold butter. Their goods become cheaper in New York, Boston and right across the 50 US states.

Of course, the news can make imports more expensive, but this is hardly a problem at present in the EU in light of the fact that the euro area is defending itself against deflation, not inflation so the near-term benefits for euro area manufacturers should be positive.

What everybody will be watching is how soon the ECB acts on its long promised QE and whether or not this will see higher levels of cash entering local economies.

Now, where did I put that business expansion plan?


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