Blog, Galway Talks, 13th December 2012

Issue: Recent media coverage on possible increase in house repossessions

Comment:  Yesterday saw a number of media reports suggesting that 2013 could see a considerable increase in the repossession of family homes.  This is due to the fact that the government is rumored to be looking at legislation, which would close a loop hole that hinders banks in progressing with repossession orders.  This came about due to a High Court judgment some time ago, where the judge in question found that unless an institution made a demand for the full repayment of a loan prior to 1st December 2009, then they could not apply for a repossession order subsequently.

What has also heightened concerns, is the introduction of the Personal Insolvency Bill in January.  It appears that the issue, where this process is completely voluntary on both for the bank and the customer, will be included.  My concern is that the banks will continue to have a veto over entering the PIB process, which could lead a greater number of repossession orders.

It remains to be seen however how the PIB will work in practice.

Question:  I was recently approached by my bank about investing some of the funds that I have on deposit in an investment for 5 years.  I am unsure as to what to do and I am wondering if there are alternative options available from other institutions?

Answer: I have commented previously on this issue, where customers are finding that they are being pressurized by their banks, who are attempting to cross sell products to them.  This listener needs to be aware of the fact that there are a considerable number of options available from alternative institutions and that their bank are only  providing them with a limited option from their suite of products.  I would recommend that you shop around.

Question:  I just finished a fixed rate period on my mortgage.  The bank has provided me with a number of options including Fixed, Variable & Tracker rates.  Have you any advice for me?

Answer:  If you are being offered a tracker rate it means that you were originally sanctioned for a tracker mortgage when you drew down the loan.  You made a mistake by opting for a fixed rate period and I would suggest strongly that you revert to the tracker rate immediately.

Remember a fixed rate loan will never be as attractive as the tracker one.

Question:  My house insurance is due for renewal soon and I note that it is overvalued.  Can you tell me what the criteria the insurance companies use in determining the value of your house?

Answer:  Valuing your house for insurance purposes is very often an area where people make mistakes.  It is the rebuilding cost of your house, rather than the market value, that is required for insurance purposes.

All insurance companies use an index provided by the Society of Chartered Surveyors as a means for determining the rebuilding cost.  It is therefore a simple process to find out the rate per square ft. for your location from this index and multiply it by the floor area of your home, which will give you insurance figure you require.