Fair Mortgage Rates Campaign presenting to Dáil Committee today

Brendan Burgess

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Tomorrow, Thursday 20th, the Oireachtas Finance Committee will be conducting pre-legislative scrutiny of Michael McGrath's Private Member's Bill on mortgage rates.

It starts at 10 am with Michael McGrath and Michael Noonan

At 11 am, the Fair Mortgage Rates Campaign, represented by Conor McNally, Stefan Goor and me, will be presenting our side of the story.

You can watch it on Oireachtas TV.

Brendan
 
The stockbrokers do not like it.
This from Goodbody this morning:


Banks Mortgage rates revisited in Oireachtas hearing in coming days
Press reports this morning (Irish Independent) indicate that Michael Noonan, the Minister for
Finance, is due before the Oireachtas Finance & Public Expenditure Committee tomorrow as
part of its pre-legislative scrutiny of Fianna Fail’s Central Bank (Variable Rate Mortgages) Bill
2016. The hearing is likely to rekindle media commentary around the issue of variable
mortgage rates in the days ahead, whilst the market is also likely to be interested in any
clarity in how the bank levy gets reconfigured in tomorrow’s Finance Bill 2017. Mr Noonan
has challenged the mortgage bill’s constitutionality in the past.

To recap, back in Q2, the main opposition party tabled a bill to give the Central Bank powers
to determine variable mortgage interest rates. However, the Central Bank indicated it did not
want the powers, a point reinforced by the ECB which will also have to be consulted should
the bill proceed further. Whilst the bill itself allows for the highest rate in the market to be
one-third above the average rate, its publication in Q2 raised concerns of parliamentary
interference in the market.

We acknowledge that variable rates in Ireland are amongst the highest in Europe,
but so also are mortgage risk weights, a key input for pricing by the banks. Irish
mortgage risk weights (under IRB) range from 27-43% for the main domestic
banks. This compares to c.15% in the UK, c.10% in Scandinavia and c.20% in
Spain. Also, collateral access for the banks in repossession typically takes longer
than in other jurisdictions and Irish term funding costs are higher (lower ratings).
As such, rates in Ireland should be structurally higher than peers. All the same,
there is likely to be further media commentary on this issue in the coming days.
Home…
 
Thanks Brendan for all your hard work with this. I actually got an email response from Michael McGrath today - fair play to him also for all his work on this.
 
We acknowledge that variable rates in Ireland are amongst the highest in Europe, but so also are mortgage risk weights, a key input for pricing by the banks. Irish mortgage risk weights (under IRB) range from 27-43% for the main domestic banks. This compares to c.15% in the UK, c.10% in Scandinavia and c.20% in Spain. Also, collateral access for the banks in repossession typically takes longer than in other jurisdictions and Irish term funding costs are higher (lower ratings). As such, rates in Ireland should be structurally higher than peers.

If this is the case, and its reasonably accepted by all parties, maybe there should be some effort on agreeing how to lower this mortgage risk, either via some sort of enhanced credit scoring model or some form of mortgage protection insurance product. I am sure other countries have addressed this same issue previously and come up with some sort of solution.
Repeating its the mortgage risk/repossession time over and over again and doing nothing to quantify it or proposals on how to reduce it is a bit tiresome for those customers paying over the odds on the mortgage.
Those of us who pay our mortgages month in month out don't really want to pay a premium to allow others to have their houses without paying a cent over an extended window. If it's government policy to delay repossessions to protect certain people, then maybe they should pay the price of the policy directly rather than a subset of mortgage holders.
 
If it's government policy to delay repossessions to protect certain people, then maybe they should pay the price of the policy directly rather than a subset of mortgage holders.

That is a very good point.

I have made the same point before that those who pay their car insurance, should not have to pay €60 (?) a year more for those who don't.

Brendan
 
I hope it's not the case that there are many BOI borrowers that are still paying a variable rate of 4.5%, when they can now fix for a period as short as one year at a far lower rate.
 
I hope it's not the case that there are many BOI borrowers that are still paying a variable rate of 4.5%, when they can now fix for a period as short as one year at a far lower rate.

Hi Sarenco

permanent tsb introduced Managed Variable Rates as an alternative to their SVR of 4.5%. The highest SVR is 4.3%, the lowest is 3.7%. So every ptsb borrower on the SVR can get a cut of at least 0.2% and up to 0.8%. permanent tsb has written to all mortgage holders explaining this.

But only 20% have actually made the phone call to the valuer to and filled in the form.

I was shocked by this. I know that Sara Hogan who campaigned at the permanent tsb AGM on this issue was really demotivated by it, wondering why she bothered to put herself out there in public on behalf of people who won't avail of a free saving.

I agree that most people on BoI's SVR should fix for one year, if they can't switch. However, I would be very surprised if more than 10% of borrowers have done so.

For most people, this is outside their comfort zone or they are too busy.

I am not saying that this is ok, I am just pointing out how people behave.

Brendan
 
Thanks Brendan.

That's a bit depressing to read and I can certainly understand why Sara Hogan found it so demotivating.

I guess some people won't be helped.:(
 
Fwiw, I ensured with PTSB that I got the minimum rate 3.7% on my <40% LTV mortgage and I still think its far too high, they are making €4000 from us per year (if you took it that their interest rates are at least 1% too high, lets say they should be 2.7%)

I experimented with an attempt to move briefly with a local Bank of Ireland branch at their 3.1% and I sort of gave up, I don't have the time for all this repetitive documentation to switch. Everything from marriage certs to pension statements god knows what next, they make it difficult, no online web Forms either, everything is paper and scanning and non-traceable so you end up following up with emails and phone calls, no pre-approval in principle either. But I will try again when I have regrouped and have more energy.

And really great work from Brendan and TD Michael McGrath, obviously hope something comes out of this, even one change, a simple cap, VR's cannot be greater than 2.5 above ECB rate...
 
Newstalk reporting that Michael Noonan told Brendan et al that cutting variable rates would cost jobs.

Seriously???
 
I sort of gave up, I don't have the time for all this repetitive documentation to switch. Everything from marriage certs to pension statements god knows what next, they make it difficult, no online web Forms either, everything is paper and scanning and non-traceable so you end up following up with emails and phone calls, no pre-approval in principle either.

I am strongly of the view that there is a huge amount that could and should be done to codify and streamline the whole mortgage switching process.

Apparently the Central Bank is currently researching this whole area and hopes to conclude this exercise early next year.

In the meantime, I would encourage you to grit your teeth and find the time and energy to switch. I know it's a pain but you are leaving a lot of money on the table by paying a needlessly high rate of interest at such a low LTV.

Customer inertia is a banker's best friend.
 
Brendan's Briefing on mortgage rates relating to the Central Bank Bill 2016 document attached as per Brendan's request.
 

Attachments

  • Briefing on mortgage rates relating to the Central Bank Bill 2016.docx
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That presentation was excellent especially


Around 35,000 non-tracker mortgage holders are in arrears. The high mortgage rates have been a significant contributor to their arrears

But it doesn't mention but to let
Boi is charging 5.65%
How can they justify that
 
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