Blog – McCarthy & Associates – Galway Talks, 25/09/2014

loan applicationQuestion:  I have been negotiating with my bank to refinance money for existing borrowings.  This has been taking some time and I am just wondering is this a common problem across all banks?

Answer:  This is a common problem across all institutions.  You are not alone in the frustration you are feeling, however you have no alternative but to continue with the process that you have entered into.

Generally, a borrower on an interest only arrangement, will have to go through the process every 12 months.

Issue:  Historically low deposit rates force savers into a dilemma, on what to do with their money to achieve higher returns.

Comment:  This is a dilemma that savers find themselves faced with for the next few years. At the moment the maximum that you are likely to get on a 12 month deposit would is around 2% gross.

I believe you have to make a decision that if you can do without these monies for a period of years then you should look at Investment Bonds.  There are quite a number of options available and you need to make a decision, regarding the level of risk you are prepared to take remembering that the risk level will be matched by the type of potential return you may receive. We all want one thing that does not exist, namely a Full Capital Guarantee with high returns.

Question:  I heard you mention recently that some investments are subject to Capital Gains Tax.  Can you give me more detail?

Answer:  Yes there are approximately 4/5 investment bonds available in the market which attract Capital Gains Tax rather than DIRT.  These bonds have some element of risk attached to them but also provide certain protection for your capital.

The benefit of Capital Gains Tax is that the tax on any gains made will be far lower than DIRT.

Issue:  80% of potential first time buyers forced to rent due to lack of finance.

Comment:  Despite the impression that the banks give and also, some media comment about the level of mortgage lending, recent figures suggest that 80% of potential First Time Borrowers are stuck in the rental market, as they cannot obtain finance.

There is a serious need to assist these buyers to get a mortgage, which will not alone help the housing market but also stabilize rents, as it will reduce demand in that sector.