Saturday 20 December 2014

House price rises are cause for worry, says bank boss

Published 08/08/2014 | 02:30

KBC chief Wim Verbreaken
KBC chief Wim Verbreaken
Now prices are rising so rapidly that it is likely to be well before that when all mortgage holders are back in positive equity

The speed at which house prices are rising is a "concern," the head of KBC Bank Ireland has said.

Belgian Wim Verbraeken has also cast doubts on claims that that houses in Dublin in particular are "undervalued."

Mr Wim Verbraeken, who took over as chief executive of KBC Bank Ireland in November last year, said a lack of homes available to buy in Dublin in particular is hitting the market, including creating a gap between the number of new home loans approved by the bank and actual number drawn down.

The squeeze on supply is seen as the main factor driving up house prices at a pace not seen even during the boom.

"When prices increase by 20pc I think it is a reason for concern, despite that being from a low base," Mr Verbraeken told the Irish Independent.

And he questioned this week's report from the Economic and Social Research Institute (ESRI) that suggested Irish house prices are undervalued.

"Any under-valuation in Dublin may be small or non-existent," he said.

However, the former Belgian army officer said it is now common for borrowers to have deposits that equal 30pc to 40pc of the purchase price of their home.

That suggests the bank would be insulated from any new negative equity shock, even if prices fell.

KBC Bank will lend up to 90pc of the price of a home in urban areas and less in rural districts, Mr Verbraeken said.

Yesterday the bank reported sharp rises in new mortgage lending and Irish deposits.

Homebuyers have drawn down close to €200m in mortgages so far this year.

However, the draw down of new loans is well below the amount of lending being approved, as buyers in Dublin in particular are struggling to buy homes even after securing a mortgage deal in principle.

Mr Verbraeken said a high-profile example this week, where KBC agreed a €223,000 write-down on the €346,390 mortgage as part of a Personal Insolvency Arrangement (PIA), was a "specific case."

It "should not be taken as an indication of a general policy, but in certain circumstances that is the reality".

Savers facing more rate cuts

THERE was a boost for tracker mortgage holders when the European Central Bank left its key interest rate at a record low.

But savers are set to endure more pain as experts said banks are likely to use the ECB decision as cover for more decreases in deposit rates.

Frank Conway of the financial education site MoneyWhizz.org said: "For savers the ECB news is not welcome. I think the likelihood is that deposit takers will keep on cutting savings rates."

Banks have been chopping back the interest they will pay savers for almost two years now.

Irish Independent

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