Ireland Financial News – Mortgages & Banking

House prices in the North have dropped by nearly 30% over the last year, according to a new quarterly survey.It confirmed 2008 was the worst year for the housing market since the start of the 1980s.

The figures were contained in the latest University of Ulster Quarterly house price index, produced in partnership with the Bank of Ireland and the Housing Executive.

The survey showed prices had fallen by just over 28% in 2008.

It also confirmed the continuing low volume of house sales, with 704 transactions recorded in October, November and December, a figure just slightly up on the previous quarter’s report of 670.

The authors said the drop was no surprise and argued that it came with the silver lining that homes were becoming more affordable for first-time buyers.

The sharp decline confirms the downward trend of recent years.

But the drop followed a period when Northern Ireland house prices rocketed over a very short period of time.

The survey, billed as the most broadly-based of those undertaken in Northern Ireland, covers approximately 120 estate agents and records all open-market transactions.

It showed the overall average price of a house in the final quarter of 2008 was £168,185 – a drop of 16.6% on the third quarter.

Some property types saw greater falls than others.

The sharpest drop was in detached bungalows, down almost 35%over the year to an average of £218,216.

Terraced or town houses fell by 28% to an average of £134,905.

In Belfast the average price of housing at £178,399 showed a 20.9% annual decline, indicating that it did better than the overall Northern Ireland market.

 The property website daft.ie has reported that rents fell by almost 12% in the past year.

The average rent nationally now stands at €885, down from €1,000 in the same period last year.

The report says 10,000 new properties come to the market every month, meaning that the total number of properties available to rent in the country at any one time is 20,000.

South County Dublin was the area most affected by falling rents, with an average 1% decline over last year to an average rent of €1,386 a month.

Cork and Limerick saw a fall of 10%, while rents in Galway and Waterford fell by 6% and 4% respectively. The fall in rents outside major cities was 8%.

The daft.ie report predicts that average rents could fall by another 20% this year.

Former Anglo Irish Bank chairman Seán FitzPatrick was given tens of millions worth of sterling and dollar loans, it has emerged.

Irish Nationwide gave tens of millions worth of sterling and dollar loans to Mr FitzPatrick as part of his loan transfers between the two institutions to conceal up to €122 million in borrowings from Anglo Irish.

The Irish Times reports that Irish Nationwide provided Mr FitzPatrick with loans of $56 million and £14 million on 26 September, 2007.

The building society also reportedly loaned the then Anglo Irish chairman $26 million on 27 September, 2006 with an undertaking from Anglo Irish that it would repay the loan if Seán FitzPatrick could not.

The report says that these borrowings form only part of Mr FitzPatrick’s loans from Irish Nationwide in 2007, as Anglo Irish Bank said last month that he had repaid €122 million.

Seán FitzPatrick borrowed from Irish Nationwide over eight years, drawing loans before Anglo Irish’s accounting year-end on 30 September, and repaying them within days with fresh loans from Anglo.

By transferring the loans, the Irish Times says, Mr FitzPatrick hid them from the bank’s auditors and shareholders.

The Financial Regulator and the Office of the Director of Corporate Enforcement are investigating Mr FitzPatrick’s loans.

 Bank of Ireland and AIB Group have agreed to delay issuing repossession orders on homes for 12 months as part of the Government recapitalisation plan.

The banks have told Government that delaying repossession proceedings for those in arrears on their mortgages for any longer would be viewed negatively by investors.

The issue of mortgage arrears has become more central in the €7bn recapitalisation talks because of rising unemployment levels.

Negotiations continue today and any final agreement may be extended as part of a new regulatory code covering mortgage arrears for the entire home loan sector.

The fine detail of the plan is now expected after markets close on Wednesday evening or early Thursday.

The Government had wanted delays in repossession proceedings for two years compared to the current six-month rule.

However, banks raise new funds by issuing bonds against using their mortgage books as security. The banks pay interest on those borrowings.

Carrying mortgage arrears for up to 24 months would make the quality of mortgage-backed securities less attractive to international investors.

It now appears banks are offering not to pursue mortgage arrears for six months and have offered not to repossess homes until 12 months has elapsed.

The compromise has regard to the distressed financial situation arising for many losing their jobs.

Other talking points have centred on executive pay.

Future bad debts

Meanwhile, it appears a firm Government guarantee of AIB and Bank of Ireland’s exposure to future bad debts on property development loans is unlikely at this juncture.

The €7bn injection may not be enough to cover future bad debts arising in the property sector, and markets are sensitive to this weakness.

Fine Gael says the Government’s bank recapitalisation plans may leave taxpayers dangerously exposed to massive bad debts.

In a statement, the party’s finance spokesman Richard Bruton said the Government should urgently consider other options, including the creation of ‘good banks’ with clean balance sheets.

Mr Bruton said Fine Gael has huge concerns that the taxpayer is being asked to put money into existing banks without knowing the full extent of the hole in their balance sheet.

He said there was a real risk that the only result will be to allow the banks to nurse along their dodgy property lending while continuing to starve viable businesses of access to the credit
they so badly need.

Fine Gael Leader Enda Kenny has said the pay and actions of top banking executives must be reviewed before the Government’s finalises its €7bn recapitalisation plan for Bank of Ireland and AIB.

Speaking on RTÉ Radio’s Morning, Mr Kenny said taxpayers’ money should be carefully employed

Last night, Minister for Finance Brian Lenihan said there was much tougher talking to be done before the Government signs off on the plan.

He said the Government will call the shots and will have a substantial influence.

Minister Lenihan said the Government has a detailed assessment of the banks’ debts but it would observe due diligence before investing in the banks, as any investor would.

Meanwhile, a group of teachers from all three teaching unions, ASTI, INTO and TUI, are to stage a picket at Anglo Irish bank, on St Stephen’s Green this afternoon.

Teachers United says the protest is to highlight the underfunding of the education system, while the banks are being bailed out.