Morning business news - July 18

Friday 18 July 2014 13.04
Morning business news - July 18
Morning business news - July 18

The Central Bank issued a warning this week about an impending time-bomb with regard to interest only mortgages.

It says a significant number are due to go onto principal and interest repayments in two years time.

Karl Deeter of Irish Mortgage Brokers said it could lead to the ramping up of an already intense scenario in the buy to let sector in particular.

"The ending of the interest only period leads to a compression for the borrower because the time they have to pay back the loan - on capital and interest - has shortened. This creates a huge difference on the amount going out every month."

He said part of the solution would likely be term extensions and more time on interest only. 

"However, part of the issue is that a large portion of borrowers will be beyond retirement age when the loan ends. What do you do with them?"

He suggested that there may be solutions in the offing for many people in this scenario, such as lump sums on retirement, pensions and endowments and inheritance.

He also suggested that rising equity values could form part of the solution when they spread beyond the capital.

Commenting on this week's figures from the Insolvency Service showing that a relatively small number of mortgage holders had entered into an insolvency arrangement, Karl Deeter said it wasn't surprising and it would take a while for it to get off the ground.

"We have this idea that when something starts it has to be instantly successful. It's only six months old and it's getting off to a decent start," he said.

"People are not opting for it because they've survived by the seat of their pants on low interest rates for the past few years. But until insolvency came in, banks weren't offering in sincerity the kinds of deals they're offering now."

He also rejected the suggestion that people were opting for bankruptcy as a nuclear option.

"It's just a highly effective option where you don't need to negotiate with your creditor. It's a full reset."

***

Christoph Mueller is leaving Aer Lingus next year.

The airline announced to the stock exchange this morning that Mr Mueller would step down as CEO and director in May 2015. 

He was appointed to the Group five years ago in July 2009 as CEO and as an executive director in September that year. 
 
The Board will now commence a process to select and appoint a new CEO and executive director.

***

Google posted profits up 6% in the second quarter to $3.42 billion on revenue of just under $16 billion.

Sales were up by a quarter at $12.7 billion. 

But the company's average "cost per click" - that's the price that advertisers pay each time someone clicks on an ad - fell 6% as Google struggled to adjust to the shift toward mobile devices.

Investors appeared to be pleased in the round with Google shares up about a percent in after-hours trading to $589.25.

***

Buyout speculation is rife in the US after Rupert Murdoch's recent attempts to take over Time Warner for 80 billion dollars.

The deal was rejected but Murdoch isn't likely to end his pursuit there.

Now the broadcaster CBS said it would consider buying news network CNN from Time Warner - but only if it were put up for sale as part of a merger between Fox and Time.

Analysts are also speculating over whether Google might vie to buy Time Warner as part of a plan to give YouTube higher-quality content.

***

Venture capital firms supported by Enterprise Ireland were more active here last year according to new figures from the Department of Jobs and Enterprise.

They invested €59 million in 94 Irish based companies - a 9% increase on the previous year.

Most of the capital is going to companies in the software and life sciences sectors.

***

Not surprisingly global stock markets are lower after a Malaysian Airlines flight was reportedly shot down over Ukraine and Israel sent troops into Gaza.

Asian stocks were down for the first time in a week.

European and US markets also closed down by between 0.5% and 1% in the round - but Russian markets plunged.