Irish Financial Review

Good news for Ireland on a number of fronts

Euro zone finance ministers have agreed in principle to Ireland refinancing expensive IMF rescue loans with cheap finance raised in the market. If, as expected the deal is done and dusted, the new, lower cost of borrowing is estimated to save the State €375m in interest charges.

Lower debt interest bill for Ireland

Positive reaction in Europe to refinance request

Currently, the IMF loans carry an interest rate of nearly 5pc and when this facility was taken out during the worst days of the State’s IMF bailout negotiations, 5% was a relative bargain. However the State can now borrow for less than 2%.
The 5pc rate applies to €18bn of the €22.5bn of IMF bailout loans.
The technical formalities of putting the new deal into practise involves all of the creditors under the original bailout deal agreeing at the same time and this is the main reason why the agreement from all creditors may not be completed in time for the upcoming Budget. All signs point to a groundswell of goodwill towards Mr. Michael Noonan, the Minister for Finance as he canvasses support.

Ireland leads euro zone with higher industrial output
IRELAND has topped the list of euro zone industrial output data for July. In statistics just released by Eurostat, the increase of 1.0 % in industrial production in the euro area in July 2014, compared with June 2014, is due to production of capital goods rising by 2.6%, non-durable consumer goods by 1.2% and intermediate goods by 0.5%, while durable consumer goods fell by 1.2% and energy by 1.3%.

In the EU28, the increase of 0.7% is due to production of capital goods rising by .3%, non-durable consumer goods by 0.8% and intermediate goods by 0.4%, while energy fell by 0.6% and durable consumer goods by 0.8%.The highest increases in industrial production were registered in Ireland(+11.3%), Estonia(+2.8%), Slovenia (+2.3%) and Croatia(+2.1%), and the largest decreases in Denmark(-4.7%), Malta (-4.2%) and Greece(-1.7%).

The increase of 2.2% in industrial production in the euro area in July 2014,compared with July 2013, is due to production of capital goods rising by 4.6%, non-durable consumer goods by 4.0%and intermediate goods by 1.6%, while durable consumer goods fell by 0.2% and energy by 4.4%.In the EU28, the increase of 2.0% is due to production of capital goods rising by 4.5%, non-durable consumer goods by 2.8%, intermediate goods by 1.9%and durable consumer goods by 0.3%, while energy fell by 3.5%.The highest increases in industrial production were registered in Ireland(+17.6%), Hungary(+12.3%)and Slovenia(+9.2%), and the largest decreases in Denmark(-6.4%), Sweden(-5.0%) and Finland(-2.7%).

Why Ireland needs a national mortgage agency

With a growing chorus on thought leaders, stakeholders and influencers calling for a national strategy on the delivery of housing, one topic which is absent from the narrative is the issue of mortgages.



There is little doubt that NAMA funding for the development and delivery of 4,500 housing units will have a positive impact on the supply side of the property market.

However, while the supply side appears to be getting the bulk of recent attention, little thought is being given to facilitating the demand side of things.

Mortgage lending, despite some signs of growth, is still hovering at or near an all time low.

Property markets requires credit and for the first half of 2014, signs point to another anaemic year. Despite the best efforts of Bank of Ireland and AIB, total lending for this year will be about the same as units drawn down in 1978.

The commercial banking sector is still massively wounded. It primary focus continues to be on debt recovery…as it should be, after all, we all want our deposits to be safe and available when we want them.

It’s now time to look at some alternatives, one of which should be a national mortgage agency. This would ensure that as NAMA-funded properties come on stream, the necessary funding can be provided to ensure available funding is available to buyers.

Mortgage agencies are not new. The US has long had many. ‘ time Ireland looked at some options.

One measure Government could use to fund such a programme is the interest savings currently being pursued as it attempts to repay international creditors early. IN fact, if managed properly, this could become an interest earner for the Government.



UK’s Jonathan Hill becomes Commissioner for Money

Jonathan Hill, the little known UK political figure has been appointed to one of the most powerful posts within the European Commission. Mr. Hill has been nominated as Commissioner for Financial Stability and Regulation.

Commissioner Hill will oversee financial stability across the EU

Commissioner Hill will oversee financial stability across the EU

What makes this appointment so interesting is the message it sends.

First, for months, the British Government and City of London have been bitterly opposed to a range of financial curbs and transaction taxes which are viewed by authorities and financial groups there as a major threat to the role of London as an international financial hub.

Second, while Britain is not a member of the Euro, this appointment will oversee the pillars of stability across the Euro area. Whether this ‘non-member running the club’ approach will have a significant impact will be foremost on the minds of those hawks of austerity; the Germans, Dutch and Finns.

Third, the selection of Mr. Hill is clearly political on a number of fronts, not least one of peace between Mr. Juncker and Mr. Cameron. David Cameron fought hard to derail the appointment of Mr. Juncker to Commission President. The gamble seems to have paid off. However, others may smell appeasement in advance of the UK referendum on remaining a member of the EU.

What will be particularly interesting in the years ahead is the approach Mr. Hill takes towards building the pillars of financial stability. Coming from the Conservative Party, one can expect it will be more balanced, which should auger well for the beleaguered financial services sector across Europe.

One thing is for certain though which is that Mr. Hill can retire the less than noble title of ‘Lord Who’. From today, he will become ‘Commissioner Money!

Apple takes a bite out of digital payments

The idea of the smart wallet has been mooted for years but finally, with one of the largest and most successful mobile technology providers, Apply entering the arena, it looks like a major push by the giant of smart technology could give ‘smart’ payments the push it needs.

Apple places a bet on mobile payments

Apple places a bet on mobile payments

Yesterday, Apple announced that it planned to offer its own version of a mobile wallet, teaming up with retailers like Target and restaurants like McDonald’s, as well as the three major credit card companies.
Simply, it means that customers of participating retailers will soon be able to buy a Big Mac or a laundry detergent with the tap of a new Apple iPhone or a new smartwatch, also announced on Tuesday.
Mobile payments are expected to reach US$100Billion over the next 5 years according to Forester Research. Competition in the digital payments sector is intense with both technology firms, banks, credit card companies and new start-ups vying for a place.

Irish players
There are a number of Irish firms in the digital payments business, including Dublin-based Realex payments, Kerry-based Monex and Stripe, founded by the Limerick based Colliston Brothers.

Apple’s solution, waving the phone, is little different from previous efforts. But Apple hopes that its promises about security, including that credit card information will not be stored on the smartphones or devices or on Apple’s servers, will convince consumers that it is safer than using a credit card.

Apple Pay will be available only on the company’s two new smartphones, the iPhone 6 and the larger iPhone 6 Plus, and the Apple Watch, a wearable computing device Apple plans to sell in 2015.
If Apple Pay can make more people use their smartphones to pay for things, it could push companies like Google, Amazon and Microsoft to reach similar deals with retailers and credit card companies, making mobile payments more widespread.
Tens of thousands of retailers in the United States, including Whole Foods Market and Macy’s, will accept it. And because of a partnership with Stripe (founded by Limerick’s Colliston Brothers), a payments processing start-up, Apple Pay can help small app developers use the service to power their transactions.

Privacy concerns
Consumers, particularly younger audiences are becoming increasingly concerned with their personal privacy across the web, which has been fuelling the rise of applications that promote privacy. Apple will need to demonstrate to users that privacy and security concerns are effectively managed.

Irish Banking Federation amalgamates and expands reach to Brussels

The Irish Banking Federation has today announced that it has amalgamated with the Irish Payment Services Organisation (IPSO). According to press release issued from the newly formed Banking and Payments Federation Ireland, the merger of the two organisations had been underway for a number of months.

Strict new regulation of banking from Europe

Banking has become a pan-European affair

With over 70 domestic and international member institutions, Banking and Payments Federation Ireland will be responsible for the promotion of member interests, including lobbying and laying the conditions for profitable banking.

Coinciding with the launch of the Banking and Payments Federation Ireland, the new organisation has announced the opening of a Brussels based office to promote lobbying and influence decision-making at European level.


Surprise rate cut announced by ECB

Today’s surprise announcement by the European Central Bank that is will further reduce the base rate of lending from .15% to .05% will come as welcome news to the almost 400,000 residential tracker mortgage holders across Ireland.

Mario Draghi has major concerns about eurozone economies

Mario Draghi has major concerns about eurozone economies

This surprise move will result in monthly mortgage repayments falling by about €10 on a €200,000 or €120 annually” said Mr. Frank Conway.

Standard Variable Rate mortgage holders are unlikely to benefit from the surprise rate cut as lenders can choose to not pass on ECB rate cuts to those customers.

Bad news for savers

The rate cut is bad news for savers as lenders are likely to further reduce deposit interest rates from their present lows.

“The news for savers is not so good. This is a market where many deposit institutions have already significantly reduced the level of interest they pay to, in some cases, fractions of a percent. On top of that, savers that do earn some interest income are liable for DIRT of 41%. Savers are now persona non grata” said Mr. Conway.

The end of the line.
Today’s interest rate cut beings the ECB base rate of lending to a new historic low.
The ECB is sending a clear message that it wants to use up its more traditional tools in a desperate bid to stimulate the economies of Europe. Its next move may be in the form of non-traditional measures, such as quantitative easing as it seeks to get more credit to SME’s and homeowners” said Mr. Conway.
Families that will benefit from today’s interest rate cut should expect to have their mortgage repayments reduced by their lender within the next 4 weeks.

Positive development in mortgage market with Bank of Ireland launch

An announcement by Bank of Ireland that it is to launch a 10-Year fixed rate mortgage is a positive development.

“The new 10-Year fixed rate mortgage from Bank of Ireland is highly competitive on price, beating many of the 5-Year fixed rate products and even matching some 3-year fixed rate deals*” said Mr. Frank Conway, Founder of, the personal finance and personal budgeting service.

Bank of Ireland launches 10-Year Fixed Rate Mortgage

Signs of positivity returning to mortgage market

Irish consumers have a mixed history with fixed rate loans

“Irish mortgage borrowers typically favour variable rate loans, where the rate of interest fluctuate as a result of the European Central Bank base rate of lending and other market conditions. However, this latest product from Bank of Ireland compares favourably to many variable rate offers, costing about 50 basis points more than many SVR deals on the market currently” said Mr. Conway.

Prepayment concern

Mortgage borrowers are typically liable for prepayment penalties when they repay fixed rate loans early.

“A major factor mortgage borrowers must consider when evaluating the merits of a fixed rate loans are what prepayment penalties apply. Typically, this can amount to a multiple of several months interest repayments which will need to be added to the loan amount if borrowers repay fixed rate loans early.” said Mr. Conway.

Signs of innovation

Bank of Ireland is showing signs of product innovation. This is the second incentive announced by the bank following an earlier announcement this year that it would pay the 1% stamp duty on home purchases for first time buyers.

“Clearly, Bank of Ireland is sending a strong message that it wants to attract attention and…customers. That in itself is a welcome departure following over a half decade of consolidation in the mortgage market.” said Mr. Conway.

*Source: National Consumer Agency


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