INVESTORS KEEPING CLOSE EYE ON IRISH MORTGAGE BOOK - This week has been one of transparency in the banking and the financial sectors. We learned of the horror on the mortgage books and the level of deposits leaving the banks. We also got details of the banks' senior and subordinated debt to central banks and investors and we learned that the Government paid no heed to warnings from department officials. We then had the Bank of Ireland apologising for causing the MInister for Finance to mislead Dáil Eireann.
The head of research at Dolmen Stockbrokers, Oliver Gilvarry, says the Central Bank information on the growing level of mortgage arrears and the high level of mortgage restructuring does hold big interest for international investors. On the ECB President's caution of a possible interest rate hike next month, Mr Gilvarry says that even a small increase will put pressure on mortgage holders - especially those who have restructured and are paying just the interest on their mortgage. However, he adds that any ECB interest rate will give the new incoming government a stronger hand when they try and negotiate a cut in the interest they will pay on the bail-out fund.
The analyst says there is no easy answer with how to deal with negative equity. He says the market is realistic and if houses are aggressively repossessed, the banks would be left with the problem of how to sell - and to whom - these homes. He says the country does not have a functional banking system yet and credit facilities have not yet returned to normal.
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MORNING BRIEFS - The European Central Bank has indicated that an increase in interest rates at the next meeting is possible. The ECB President Jean-Claude Trichet dismissed the idea that a rate rise in April could be bigger than 25 basis points, saying such a scenario was 'not the appropriate interpretation'. KBC's chief economist, Austin Hughes, is predicting rates rising at three monthly intervals to bring the rate to 2% by the end of the year or early in 2012. The last interest rate increase since July 2008. Lyndsey Clemenger, an economist at Ulster Bank, said that while they had expected the ECB to move in a somewhat of a more hawkish direction, they went further than we and indeed the markets were anticipating.
*** On the currency markets, the euro is worth $1.3960 cents and 85.72 pence sterling.
