First Active launches 100pc mortgage

Anyone know why they won't give this mortgage to purchasers of studio or one bedroom apartments? Is it something to do with the value of the property??

Hi Joel

yes you can still apply for a mortgage with First Active, you can change your loan offer any time up to closing, and if First Active cannot advance the same loan amount, you still have your first offer in place

regards
Deirdre
[email protected]

Thanks Deirdre.

Regds
Joel

Met 1st Active representative.
The only stipulations are that the maximum term is 30 years, that you're a 1st time buyer, that you're in 3 years continuos employment, that its a house/apartment and not a site, and that if its a new development the deeds are handed over at the 1st payment stage.
Found out the only catch - their interest rate is 3.29% compared to 3.1% for most other banks.
Also, they only cover the mortgage cheque, so the borrower must provide the deposit, solicitor fees and other expenses.

Suppose this was only a matter of time.
So which institution will be next to follow? Say First active is taking advantage of bring first mover here and therefore is charging a slightly higher interest rate?
Say other institutions will follow in next few months.

Quick point of clarification - the 3.29% interest rate is for their Current Account Mortgage (which is available on the 100% product). The tracker mortgage rate is 3.25%.

Liam D Ferguson

Has anybody looked at the differance in interest paid on a 92% mortgage and a 100% mortgage over the thirty years. The consumer is not winning on this one,if a lot of borrowers are going to be mortgaged to their necks, for a considerable extent of the thirty years. What of the loan to value ratio in this context as well.
The irony of this is , my first mortgage was set at something like 11% or 12% fado fado!

Hi MaryRose,

You're absolutely right - the more you borrow, the more you pay the lender back in interest. But that concept is not restricted to 100% mortgages - you'll pay more interest if you borrow 92% compared with a loan of 85%.

Ideally you should borrow as little as you can get away with. The problem facing many First Time Buyers now is that house prices have continued to increase faster than they can save for their deposit. So in trying to save for the deposit and thus holding off on buying, the house price and therefore the required mortgage has increased, and a bigger mortgage = more interest to be paid and around and around it goes.

What of the loan to value ratio in this context as well.

Click to expand...

Not sure if I understand your question - the Loan to Value ratio on the new First Active and Permanent TSB FTB mortgage products is 100%.

Regards,

Liam D Ferguson
www.yourfirstcastle.com

If house price levels plateau, or stagnate over long periods , and the true value of houses in the Dublin area is inflated anyway, or if we see a return to a more realistic property market in that thirty year time frame, are these going to be very very expensive mortgages. Am I being too pessimistic here?

Hi MaryRose,

But the true long-term cost of a mortgage is not governed by the Loan to Value ratio, or by prevailing property values - it's governed by prevailing interest rates.

If there was a drop in Irish property values, those who recently took out 100% mortgages would be more at risk of negative equity, i.e. owing more than the property is worth. But even this scenario would have no bearing on the cost of the mortgage.

If we look at the supply/demand equation, once most FTB's have extra 'demand' (i.e. able to offer higher amounts due to 100% mortgage), then surely prices are bound to rise to meed this extra demand.

Hi RainyDay,

Bear in mind that the 100% package doesn't actually qualify anyone for a bigger mortgage. If anything, the bids on properties will need to be slightly lower because of the 100% mortgage. (If your income qualifies you for €250,000, you can bid €250,000 for a property on a 100% mortgage. But if you have managed to save an 8% deposit, the same €250,000 mortgage will see you buying a property for ~€272,000.)

I'd suspect that there will be a temporary surge in First Time Buyer property-buying which will drive up prices temporarily. But the surge will only last while all those potential FTBs currently saving for a deposit forget about the saving and jump into the market now. That's a finite number of people. Once they've all bought their first homes, the market should level back to a point where all potential FTBs can get on the market as soon as their income is sufficient to qualify them for the right size of mortgage. That's a steady stream of people, comparable to the steady stream of people that were buying their first homes prior to the introduction of 100% loans.

Cheers, Liam