LIA PRESENTATION WEST OF IRELAND. 9th APRIL 2018 MORTGAGE MARKET Update & Opportunities

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1 LIA PRESENTATION WEST OF IRELAND 9th APRIL 2018 MORTGAGE MARKET Update & Opportunities

2 Introduction Michael Dowling Dowling Financial QFA, PIP,CUA, CUG APA (Debt Mgt, Per Gen Ins) M.Inst.D

3 Background Bank of Ireland Eagle Star Gunne Financial Services Dowling Financial 10 Years 2 Years 10 Years 15 Years

4 Background Founding Member of IMAF President of IMAF 7 years Chairman IBA Mortgage Committee Board Member, Malahide Credit Union - 10 yrs Chairman of Credit Committee/Investment Committee Mediator

5 Mortgage Market Year BN Volume , % 29,498 7% % 34,793 18%

6 Mortgage Market YEAR BN 2018 (f) (f) * 20 *Goodbodys

7 First Time Buyers Year BN % %

8 SSB Year BN % %

9 Switcher Year MN % %

10 Buy to Let Year MN % %

11 Mortgage Market Breakdown 87% 10% 1.5% 1.5% Lending to FTB and SSB Switcher Top Up Buy to Let

12 Interest Rates SVR Standard Variable Rate AIB/Haven 3.15 EBS 3.70 KBC 4.05 * Ulster Bank 4.30 ptsb/bank of Ireland 4.50 Pepper n/a *Current Account

13 Variable Interest Rates LTV 50% 50-80% 80-90% AIB/Haven KBC* Ulster Bank* Pepper EBS ptsb Bank of Ireland *Current Account

14 3 Year Fixed Interest Rates LTV <60% 60-80% 80-90% Ulster Bank* KBC** Bank of Ireland ptsb*** EBS AIB/Haven Pepper n/a n/a n/a *Current Account ** Current Account *** > 250K

15 Other Fixed Options Ulster Bank 4 Year Fixed 5 Year Fixed 2.6% 2.6% <80% LTV > 500,000 AIB 7 Year Fixed 3.5% Up to 90% LTV KBC 10 Year Fixed 3.05% 3.20% 3.75% <60% LTV 60-80% LTV 80-90% LTV

16 Mortgage Fixed or Variable? 88% Bank of Ireland 60% ptsb 46% AIB

17 NIM (Net Interest Margin) AIB Bank of Ireland ptsb 2.58% 2.29% 1.80% Ulster Bank 1.67%

18 Market Share AIB/EBS/Haven 33% 36% Bank of Ireland 27% 25% Ulster Bank 14% 18% ptsb 13% 9% KBC 12% 12% Pepper Not available

19 Macro Prudential Rules Introduced February 2015 Amended January 2017 & 2018

20 New Lending Criteria LTV - Loan to Value First Time Buyer 90% of purchase price

21 Median Deposits - FTB Average Deposit Q Dublin 50,888 Cork/Limerick/Galway 31,000 Nationwide 36,500 Source: Banking & Payments Federation Ireland (BPFI)

22 Median Deposits - SSB Average Deposit Q Dublin 140,019 Cork/Limerick/Galway 76,000 Nationwide 90,000

23 MORTGAGES BPFI HOUSING MARKET MONITOR Q4/2017 Median deposits The median deposit* for FTBs rose by 1.4% to 36,500 in Q4 2017, while the median mover purchase deposit jumped by 11.7% to 90,000. In both cases, median deposits rose to their highest levels since the data series began in Customer Type FTB Mover Purchase 150K 150K 140K 140K 130K 130K 120K 120K 110K 110K Dublin continued to have by far the highest deposits: 50,888 for FTBs and 140,019 for mover purchasers. However, the median FTB deposit in Dublin fell by 7.5% while it rose by 4.5% in the Dublin Commuter region (Louth, Meath, Kildare and Wicklow). The median deposits for mover purchasers increased by 13% year-on-year in Dublin and by 16.9% in the counties Cork/Galway/Limerick/Waterford to 76,000. Median Deposit 100K 90K 80K 70K 60K 50K 40K 100K 90K 80K 70K 60K 50K 40K *The median deposit is derived from sample loan-level data provided by BPFI members. The analysis is subject to regular revision as new data is made available. 30K 20K 30K 20K 10K 10K 2015Q4 2016Q1 2016Q2 2016Q3 2016Q4 2017Q1 2017Q2 2017Q3 2017Q4 2015Q4 2016Q1 2016Q2 2016Q3 2016Q4 2017Q1 2017Q2 2017Q3 2017Q4 Source: BPFI

24 New Lending Criteria SSB - 80% Max LTV Purchase Price 300,000 Max Loan 240,000 Contribution 60,000 Excluding, Stamp Duty 3,000 Legals 3,000

25 New Lending Criteria LTI = Loan to Income Max 3.5% Gross Salary Single or Joint Max Mortgage Single earning 30, ,000 Joint earning 65, ,500

26 STRESS TESTING 250, year term 3.25% 1, % 1,381 Exemption 1,381 x 25% 1,726

27 MORTGAGES BPFI HOUSING MARKET MONITOR Q4/2017 Customer Type Borrower incomes 130K FTB Mover Purchase 130K Median borrower incomes (the sum of all borrower incomes) rose by 5.4% year-on-year for FTBs to almost 67,500 but were broadly unchanged for mover purchasers at about 100, K 110K 100K 120K 110K 100K Median borrower incomes for both FTBs and mover purchasers in Dublin were significantly above the national average. FTB incomes rose by 6.9% yearon-year to almost 80,000 in Q4 2017, while mover purchase incomes rose by 0.6% to about 120,000. FTB incomes in the Dublin Commuter region rose by 4.3% year-on-year to almost 69,000, while FTB incomes rose to almost 63,000 in the counties Cork/ Galway/Limerick/Waterford, the highest level in the region since the series began in Median Total AnnualIncome 90K 80K 70K 60K 50K 40K 30K 90K 80K 70K 60K 50K 40K 30K *Median borrower incomes are derived from sample loan-level data provided by BPFI members. The analysis is subject to regular revision as new data is made available. 20K 20K 10K 2015Q4 2016Q1 2016Q2 2016Q3 2016Q4 2017Q1 2017Q2 2017Q3 2017Q Q Q Q Q Q Q Q Q Q4 10K Source: BPFI

28 MORTGAGES BPFI HOUSING MARKET MONITOR Q4/2017 Customer Type Price-to-Income Ratios 4.4 FTB Mover Purchase The ratio of property purchase price to the combined incomes of borrowers (price-to-income) is a useful measure of affordability and complements the Central Bank of Ireland s loan-to-income ratio The median price-to-income (PtI) ratio rose by 5.3% year-on-year for FTBs and by 4.7% formover purchasers in Q4 2017, to 3.7 and 3.41, respectively. These were the highest levels since the series began in The median PtI in Dublin was higher than four for both FTBs and mover purchasers for the first time since the series began. Median PtIs rose year-on-year in all six regions. Median Price-to-incomeratio *The median PtI ratio is derived from sample loan-level data provided by BPFI members. The analysis is subject to regular revision as new data is made available Q4 2016Q1 2016Q2 2016Q3 2016Q4 2017Q1 2017Q2 2017Q3 2017Q Q Q Q Q Q Q Q Q Q4 2.0 Source: BPFI

29 April :55 IST/BST. In 2017, there were 826 such transactions up 25% on the 661 recorded in 2016 and up fivefold from the 160 trough in Dublin continues to account for the lion s share of these transactions at 709, or 80% of the national total. The number of transaction above 1m rose by 25% in Dublin compared to the 568 in However, other areas are also seeing growth in the 1m+ price bracket. Cork saw 38 transactions above 1m, up 38% on Similarly, Galway saw 17 transactions, up 42% Source: Property Price Register Dun Laoghaire/ Glenageary 7% Dalkey & Killiney Dublin 18 Blac kroc k North Co. Dublin 5% 7% Other 8% 30% Dub Dublin 6 Given that there are currently 506 properties lin 4 with an asking price exceeding 1m

30 New Lending Criteria Buy to Let Mortgages Max Loan 70% LTV

31 New Lending Criteria Exemptions Loan to Value & Loan to Income do not apply to Switcher Mortgages Negative Equity Mortgages Arrears Resolution

32 New Lending Criteria Exceptions 20% of Loan Book LTV 5% of Loan Book < 90% above 80% SSB s only FTB only 10% of Loan Book LTI > 3.5 Gross Salary SSB s only 20% of Loan Book LTI > 3.5 Gross Salary FTB only 10% of Loan Book LTV (BTL) above 70% 2% of lending had both exceptions

33 New Lending Criteria FIRST TIME BUYER (FTB) -SINGLE NO ISSUE ONE FTB, SECOND NOT - MAX 80% BOTH DEFINED AS NON FTB

34 Lending Criteria TERM OF MORTGAGE AIB/EBS/HAVEN/ULSTER BANK* PEPPER KBC Bank of Ireland/ptsb AGE SELF EMPLOYED* 70

35 Pepper Homeloans Positives New entrant 150m in approvals PDH Rate very competitive TOP 3 Debt Consolidation Consider those with previous impaired credit Secured Loan no missed payments for 4 years Unsecured Loan no missed payments for 3 years Cheapest BTL rate from 4.5% (50% LTV)

36 Pepper Homeloans Positives Self Employed best in the market Mortgage versus yield main criteria on BTL s Last two years figures +20% 12 months accounts Reluctant landlord Credit assess at prevailing Tracker Rates Equity release only player

37 Pepper Homeloans Negatives Arrangement Fee of 0.5% of Mortgage Capped at 1,800 Restrictive list of locations Louth - Galway Max loan 750,000 SSB - 450,000 FTB

38 Dilosk Buy to Let Mortgage Only 200m to lend Interest only,15 years Lend to Company,SPV and Pension Trustees Interest Rates from 4.49%

39 BOMAD DAC LONG ESTABLISHED, UNREGULATED BANK 50% AUDIENCE ARE SHAREHOLDERS NO RETURN ON INVESTMENT

40 Bank of Mam & Dad 43% EXPECT A GIFT 30,000-40, ,000 OUR HIGHEST

41 Rebuilding Ireland Home Loan Launched 1 st February m Fund ( 200,000 purchase price, 1,000 mortgages) New Purchase or Build and Second Hand Homes Must be FTB Single applicant 50,000 max salary Joint applicants 75,000 max salary

42 Rebuilding Ireland Home Loan First applicant PAYE, continuous employment for 2 years (not permanent) Second applicant PAYE, continuous employment 1 year Self Employed 2 years Certified Accounts Declined by 2 Banks or offered insufficient finance

43 Rebuilding Ireland Home Loan 90% Purchase Price Max Loan Max Purchase Price 320,000 Dublin, Cork, Galway, Kildare, Louth, Meath & Wicklow Max Purchase Price 250,000 - rest of country

44 Rebuilding Ireland Home Loan side step Central Bank Macro Prudential Rules Ability to service debt Max 30% of income to service mortgage Local Authorities Unregulated Financial Providers

45 Rebuilding Ireland Home Loan Single Applicant 40,000 Salary Bank Qualify for 140,000 Equates to 3.5 times Gross Salary RI Home Loan Qualify for 198,000 Equates to 5 times Gross Salary

46 Rebuilding Ireland Home Loan Joint Applicants 75,000 Salary Bank Qualify for 262,500 Equates to 3.5 times Gross Salary RI Home Loan Qualify for 288,000 Equates to 4.1 times Gross Salary

47 Rebuilding Ireland Home Loan Interest Rates 25 Year Term 2.00% Fixed 30 Year Term 2.25% Fixed 30 Year Term 2.30% Variable Rate

48 Rebuilding Ireland Home Loan 2% fixed - 25 Year Term RI Home Loan Repayment 839 per month Bank Repayment 970 per month

49 Rebuilding Ireland Home Loan 2.3% Variable - 30 Year Term RI Home Loan Repayment 762 per month Bank Repayment 889 per month HELP TO BUY GRANT AVAILABLE AS WELL

Negative Equity Mortgages 300 in 2017 175% combined value

50 Negative Equity Mortgages 300 in % combined value Income too high Bank must consider Debt Warehouse or Write Down

51 Housing Market ,022,895 RESIDENTIAL PROPERTIES IN IRELAND 55,000 RESIDENTIAL PROPERTY TRANSACTIONS 32% CASH BUYERS (exclude funds) 2.75% HOUSING STOCK (TRADING) AVERAGE HOME SOLD ONCE EVERY 36 YEARS 4% 5% FUNCTIONING MARKET

52 MORTGAGES BPFI HOUSING MARKET MONITOR Q4/2017 Cash Sales Ratio Cash sales accounted for 32.2% of sales on an annualised basis in Q4 2017, down from 38% a year earlier. Cash sales in the Dublin Commuter region fell to 21.3% and in Dublin to 23.4%.Cork/Galway/Limerick/Waterford was the only region where the cash sales ratio increased from Q but at 23.6%, it was well below its Q level of 40%. The cash sales ratio continued to decline in the other regions but remained above42%. HMM cash sales% 55% 50% 45% 40% 35% 30% 55% 50% 45% 40% 35% 30% Cash sales represent all non-mortgage sales. The cash sales ratio is calculated by dividing the volume of mortgage drawdowns for house purchases by the volume of residential property purchases by households at market prices. The data is reported on an annualised basis. The cash sales ratio is derived from BPFI sample loan-level data and CSO residential property data. The analysis is subject to regular revision as new data is made available. 25% 20% 25% 20% 15% 15% 10% 2015 Q Q Q Q Q Q Q Q Q4 10% Source: BPFI/CSO

53 Housing Market 2016 Average Prices First Time Buyer Nationwide 247,000 Dublin 368,356 Limerick 180,670 Galway City 273,466 Cork City 261,494

54 HELP TO BUY SCHEME New Properties First Time Buyers Both if joint application Min Mortgage 70% of Purchase Price Capped at 20,000 or 5% of Purchase Price Purchase Price 200,00 Max Rebate 10,000

55 HELP TO BUY SCHEME Based on Income Tax paid in the previous four years 8,167 applications in ,430 claims - 69 Million Average claim 15,000 Applications equal to 50% of FTB who took out mortgage

56 Non Performing Loans (NPL) KBC 35% ptsb 26% AIB 16% Ulster Bank 16% Bank of Ireland 8% EU (Average) 5%

57 Mortgage Arrears Q PDH Number Balance BN Arrears BN 729,722 98,521,574 >90 days 48, % 9,694, % 2,486,830 >720 days 28, % 6,417, % 2,233,606

58 Properties Repossessed , % Housing Stock 34% voluntary surrender

59 Mortgage Arrears Q Buy to Let Number Balance BN Arrears BN 122,366 21,946,335 >90 days 18, % 4,984, % 1,782,560 >720 days 13, % 3,823, % 1,584,093

60 Properties Repossessed ,977 32% voluntary surrender

61 Alternative options Icare 100m fund AIB MTR (Mortgage to Rent) PTSB BTL /Voluntary Surrender/Residual debt written off Vulture Funds PDH & BTL Voluntary surrender /refinance less than balance/residual debt written off.

62 IS THERE A FUTURE FOR THE MORTGAGE BROKER? YES Market Share 22% % 2020

BPFI Housing Market Monitor Q3/2017

BPFI Housing Market Monitor Q3/2017 With a commentary by Dr Ali Uğur Chief Economist, Banking & Payments Federation Ireland OVERVIEW OF TRENDS Indicator Latest quarter One year ago % change Dwelling completions