Thrifty Pages

How to deal with a mortgage interest rate rise...

Now that it has been confirmed that PTSB are going to raise their interest rates, it may be time to take a look at how your finances would handle an interest rate rise.  

Many commentators believe that most of the other banks will follow PTSB later this year, after the NAMA issues have been ironed out. Take time to consider how your finances will cope now, even if you are not affected right now.

• First, check to see if your mortgage rate is competitive by checking out the mortgage rates on MyHome.ie, or talk to a mortgage broker about what is on offer in the market.
• Check the National Consumer Agency advice on switching mortgages and what you need to consider before switching to see if that will save you money.
• If you cannot avoid paying extra interest, make sure you are claiming your mortgage interest relief (if you can) and claim all your tax relief.
• If you can do nothing about your mortgage, how else can you save money? Look through the 'Save Money' section of Thrifty Pages. We have loads of ideas for you on to save some money :)

What happens when you cannot pay your mortgage?

Image by jakerome

A banker is a fellow who lends you his umbrella when the sun is shining and wants it back the minute it begins to rain. - Mark Twain

While the rich and increasingly irrelevant oligarchs who have run our country into the ground argue over who should get their nose deeper into the trough, the rest of us are having problems.

Up to 1,000 a month are now seeking help to pay their mortgage, according to the Irish Independent. Most of these people are applying for mortgage interest relief supplement which is seems to be very hard to get as "large numbers of families are being refused the payment because of strict rules on who can qualify." 

However, you should still apply (contact the Community Welfare Officer at your Local Health Centre). But apart from this, what else should a person do?

The good news is that there is now a code of conduct on mortage arrears that all lending institutions have to comply with. This is available on the Financial Regulator website as a PDF.

Briefly, this sets out:

• There is a gradated escalation process with a series of attempts to manage the arrears situation at various stages.
• There is a moratorium on repossession being taken within the first six months of arrears (or 12 months in some cases).
• The bank must keep records of its dealings of each case of mortgage arrears and these records available to the Financial Regulator.

So if you are in trouble, the first thing to do is TAKE A DEEP BREATH!

Don't panic, nobody is going to be knocking at your door straight away. While there have been stories in the media about banks making persistent phone calls, they have to comply with the above process.

The next thing to do is to seek advice - contact MABS and have a chat if you can.

If you are worried and getting depressed, seek help for this as soon as you can.  You can always find a listening ear at the Samaritans and this can really lighten the burden.

Talk to your bank and tell them your situation. This may help in later negotiations. Be realistic about what you can pay and don't make false promises. You need to eat and heat your house first. It will also damage your credibility with the bank if you make promises you are not able to keep.

And last but not least, remember that all things pass. The days may seem bleak, but try to get some perspective. You can get through this. 

Whatever you do, don't hide in the sand - as Joseph Conrad said, "“Facing it, always facing it, that's the way to get through. Face it.”

Fallen behind in your mortgage? Here is some good news

If you are experiencing some difficulty with your mortgage (and there is plenty of evidence that people are) then you will be glad to know that Ireland’s banks have agreed a new Protocol with MABS (the State-funded independent service for people in debt) to help customers to manage debt when under severe challenge.

Photo by woodleywonderworks

This Protocol will allow banks and MABS money advisers to work together to help stressed customers to manage debt problems and, wherever possible, to formulate a mutually-acceptable, affordable and sustainable repayment plan. 

It sets out the agreed steps by which banks and MABS money advisers will work together to try to put such a plan in place. This is a much better situation that having to go it alone to the bank when you are under financial pressure. The actual scheme will go live and become fully operational on 28th September once all the training and documentation for relevant staff within the banks and the MABS are in place.

You can read the full press release here (PDF).

If you are having problems with your mortgage or any debt, do yourself a favour and contact MABS straight away. They can really make a huge difference! They already provide a great leaflet on managing mortgage arrears (PDF).

Understanding the mortgage interest relief situation

There is a lot of hype and noise about the loss of mortgage interest relief.
Here are some links that will help clarify the situation for you:

• The full statement from the Revenue Commissioners on the matter
• More detailed information on the Revenue website
• General information from Citizens Information
• The Examiner on how well our government handles these matters - NOT

Mortgages in the recession - Q & A with an expert

I recently had a chance to pick the brains of Marketing Director of the Irish Mortgage Corporation, Frank Conway.

I asked him a few questions that we have gotten in from our readers and he was kind enough to provide a reply.

• Thrifty Pages - Can a first time buyer still get a mortgage?

Frank Conway - Yes, first time buyers can still get a mortgage. Bank of Ireland and AIB are both still lending up to 92% of the purchase price. Interest rates begin below 3%, which is an excellent offer. What has changed over the last 12 months is mortgage lenders are no longer prepared to lend 100% of the purchase price, lenders are now reluctant to accept all bonus and or commission income since neither can be guaranteed in the current economy.

• Thrifty Pages - What percentage mortgage can a person get now?

Frank Conway - Probably answered above, Bank of Ireland (BoI) and AIB both lend up to 92%, other lenders are offering 90% or less of the property purchase price.

• Thrifty Pages - If I am falling behind in my mortgage, what should I do?

Frank Conway - If you are falling behind on your mortgage then call your lender right away and talk to them. The last thing a lender wants to do is have a paying customer who may have difficulty making the monthly payments. In most cases, lenders are prepared and willing to work with the mortgage customer.

• Thrifty Pages - How do I negotiate a better deal with my existing lender?

Frank Conway - Negotiating a better deal. This has become a tricky one. If you have a tracker mortgage, you are unlikely to beat the deal you are on currently. If you have a standard variable, it may be hard to also beat the deal you are on. If you have a fixed rate mortgage, look out for some big switcher charges. Your bank may be willing to offer you a better deal on the face of things but you could incur some hefty break charges (up to €10,000 or more wouldn't be exceptional). So, even though you get a better interest rate, bank charges to switch could negate the value. You really need to do your homework on this one, know all of the costs - banks are in the driving seat now and are not really negotiating, they are simply looking to survive.

• Thrifty Pages - How do I switch my mortgage to another lender if I find a better deal?

Frank Conway - See my point above. If you get a better deal with another bank, be fully aware of any costs your own bank can incur for breaking out of a fixed rate mortgage. The break charges can be enormous. It could kill the reason for switching.

Frank Conway is Marketing Director of the Irish Mortgage Corporation, Ireland’s largest independent mortgage broker. They can be contacted on 1850 444 474.

If you are in arrears with your mortgage, the Money Advice and Budgeting Service - MABS provide some very useful information on their website. Their helpline be contacted on 1890 283438.