Blog – David McCarthy – Galway Talks, 06/02/2013

galway-bayfmIssue:  AIB introduces new scheme for struggling mortgage holders.

Comment:  Earlier last year GE Mortgages was purchased by the Australian financial firm Pepper.  They introduced an innovative loan structure for their troubled clients which assists them in being able to meet their repayments, whilst at the same time “parking” the balance of the loan on an interest free basis(to be repaid at some stage in the future). 

AIB have now followed the lead of Pepper and introduced a similar scheme for their struggling mortgage holders.  For example, if someone owes €300,000 and the current value of their property is €200,000, then the €200,000 figure will become the first part of their loan, with the balance parked on an interest free basis for repayment at some stage in the future.  It is understood that AIB will write off up to 20% of the first portion of the loan and the client will then subsequently make repayments on €160,000.  Subject to certain repayment targets there is also the possibility to earn further write-offs the loan in the future.

This is a welcome development, as it shows that finally a major bank is taking a realistic view of their mortgage book.  It is unknown how many customers will benefit from the new structure, as the bank has said they will choose who it will offer it to. 

It is to be hoped that other institutions will follow this template.

Issue:    Investors to return to taking on more risk in 2014.

Comment:  With falling deposit rates and unproductive returns from Capital Guaranteed investments, it is evident at the moment that investors are taking on more risk in 2014 than they would have done in previous years.  The reduction in the “fear factor” over issues like the Euro and the Irish economy, has resulted in confidence returning to financial markets. 

It has become obvious that investors realize that they need to take on some element of risk, if they are going to achieve decent returns over the next few years.

Question:    I have paid up pension benefits from a previous employer.  I am just wondering what options I have, as I am completely confused as to how these monies are invested.

Comment:  This is a common situation where employees have moved from an employment and left their retirement benefits with their previous employer.  If you want to have control over how those benefits are invested and break the link with your previous employer’s scheme you will have to opt for a retirement bond, which I would recommend.

There are a variety of options with regard to how these monies can be invested and it is important that you get advice.