KBC bonding removed

KBC have ceased dealing with their MIG (mortgage indemnity guarantee - sometimes just called ‘bonding’) company.

an indemnity bond or guarantee is an insurance that provides cover for a bank when lending over certain LTV’s.
without getting into the nitty gritty (if anybody actually cares i’ll post more!) the result is that you won’t be able to borrow more than 80%, last week a first time buyer could still get 92%

if other bank/bonding relationships go the same way then it will really have a knock on effect on credit availability and then property prices. this could be a totally unforeseen distortion. We’ll have to see if it is specific to KBC or if it happens with other lenders. This kind of credit contraction out of the blue is a danger.

AIG needed a bailout because the insurance policies they offered were getting called in (granted they spent the money rather than putting it aside for claims!). There is either a fear that loan indemnity guarantees will be called in or Bonding companies have realised in the face of decreased competition that they can charge what they want… anyway, watch this space.

MB, could this lead to the government seeing the need to push the Homechoice scheme even harder?

unfortunately yes but only if it spreads to other banks - genworth are only one bonding firm. others like GE also do bonding. maybe there will be a re-shuffle of providers the same as there is in re-insurers with the life co’s.

if it does go across the board the instant credit contraction will make some serious waves

there is a piece in tomorrows indo about this, i’ll also call around the banks tomorrow and get more info.

That’d be rather cool. That’d knock a lot of folks out of the market and although I feel for them on a personal level, on the other hand that is good for me. I have more than 20% deposit for my target price. Less competition is good.

thats the housing market dead then.


Not when the government will be in control of the banks by the weekend.

Wow! So it’s not a rumor. This is big. I know some countries like France for example have such conservative lending policies. I think the buyer must have some 25% there. This is massive.

That’s the first time I’ve seen the exception for public servants being less than 100%! Signs that KBC see public service jobs as not 100% secure?

They put 5% premium on job security. The 15% is the anticipated drop of house prices I presume.

No exaggeration to say this is the biggest news to the housing market this year. If banks only start offering 80% LTV loans to first time buyers, then imagine the miserable loans that trader-uppers and investors will get. The lid is on the cofin and the first nail has been driven through.

Watch EBS/ILP. If they drop their rates, that is the last nail in the cofin.

They are not speaking about FTBs. I think this covers everyone! Investor mortgages have been more onerous for some time already with higher rates and lower LTV ratios.

This seems like a perfectly reasonable approach to take when even former bubble cheerleading Bank ‘economists’ are forecasting 20% + drops in the value of residential property.

So now you’ll get the opportunity to lose your own money for a change, rather than the Banks.

it is across the board, not just FTB’s, the sad thing is that if it occurs with other lenders it places a reason for the likes of homechoiceloan to exist.

No it doesn’t, it places a reason for vendors to drop their asking prices - not for the government to interfere (potentially risking billions of taxpayers money) just to prop up an unsustainable market.

There is too much government interference in the property market already.

Even if there is a case, the case is for the government to provide fixed interest loans for deposit, perhaps to key workers? Having said that, it is already what the CUs do, so there is probably not much requirement for it. The banks should, of course, take the repayments on these loans into account when working out how much mortgage can be afforded.

I can see where you are going with this but if you work through that example you’ll get a better idea of what i mean.

Joe agrees to buy a house from John at 200k he has a 10% deposit, BankX yanks the 90% loan, you now need a 20% deposit, Joe can now only afford a property priced at 100k because his 20,000 (10% of 200k) is now 20% of 100k. However, he feels the market will likely not adjust to half of its current price and so he goes to homechoiceloan. The alternative, in his mind, is to be forced into renting when he was ready to buy, remember: distortion is about getting people to act in a manner than they otherwise normally would, this works both ways.

A move like this will drive people into homechoiceloan.ie and leave the Govt. sitting smug saying ‘I told you we needed this scheme’