FF Bill to tackle mortgage rates to be debated on Tuesday and Wednesday night

I don’t think it would have the desired effect.

Banks would probably think of more creative ways of incentivising new customers other than a reduction of interest rates.

The Dáil could, of course, threaten to take away the central bank’s customer protection function and give it to the CCPC.
 
Brendan Burgess said:
If the CB has the power, it's likely that the lenders will reduce their rates to avoid forcing the CB to use its power.
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Surely that will only be the case if the banks believe there is a credible threat that the Central Bank would ever actually exercise those powers?

I strongly suspect that banks are well aware of the fact that there isn’t a snowball’s chance in hell that the ECB would ever permit the Central Bank to actually exercise any of these powers. Bear in mind that the Central Bank cannot act unilaterally in these matters following the introduction of the single supervisory mechanism.

I’m not convinced about the wisdom of the provision of the Bill that prohibits discrimination between existing customers and new borrowers in setting a variable interest rate for a group, class or category of principal dwelling house mortgage loans.

  • Firstly, such a provision would reduce the incentive for incumbent lenders to innovate and bring more competitive products to market. This would have an adverse impact on competition and would ultimately be expected to result in higher rates overall.
  • Secondly, it would reduce the ability of incumbent lenders to react positively to more competitive products introduced by new entrants. Again, this would have a negative impact on competition within the mortgage market.
  • Thirdly, it could be easily circumvented by lenders competing on matters other than rates and it is of no assistance whatsoever to borrowers where the lender is not actually trying to compete for new customers (the Danske/debt fund scenario).

To my mind this legislation is more about political manoeuvring than actually trying to protect the position of borrowers that are not in a position to refinance their loans.
 
Brendan Burgess said:
"7) Lenders must offer existing customers the rates available to new customers, other than one off payments for stamp duty and legal costs."
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Will this really make that much of a difference? for KBC - yes, but for the rest?
Ulster Bank you can move to whatever product you meet the requirements for
AIB/EBS?
BOI?

Also, just thinking - If the banks are forced to reduce rates
Surely the banks will make less money. Then the future rate cuts (if any) wont come as quick...?
 
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"A Government spokesperson said today it will try to move a reasoned amendment to this bill in the Dáil.

...

They said there may be constitutional issues with the Fianna Fáil approach and the matter of variable interest rates is area for the Competition Authority and not the Central Bank."

And this is what the Competition Commission said:
Competition Commission rejects investigation of mortgage rates

"
The concerns you raise regarding the current state of the banking sector in Ireland and the nature of competition between banks are well known to the Commission. However, I believe that a further study would not be useful at the present time as it would not resolve the issues inherent in the sector. Furthermore, I believe that the Commission's resources would be more appropriately utilised in other areas where our work could achieve meaningful change. I would point out however that the Commission continues to be active in the sector."

Irish mortgage holders are being overcharged by around €1billion a year and the Commission thinks that it's not important enough for them.

But when it's put to the Oireachtas to give the Central Bank control in the area, the Minister for Finance says it's none of their business.

Brendan
 
SS expert said:
Will this really make that much of a difference? for KBC - yes, but for the rest?
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Bank of Ireland does not allow people move variable rates. They keep their variable and fixed rates artificially high for existing customers by giving 2% cash back to new customers.

permanent tsb does pass on cuts to existing customers, but again keep their existing rates artificially high with the 2% trick.

Brendan
 
Brendan Burgess said:
Bank of Ireland does not allow people move variable rates. They keep their variable and fixed rates artificially high for existing customers by giving 2% cash back to new customers.

permanent tsb does pass on cuts to existing customers, but again keep their existing rates artificially high with the 2% trick.

Brendan
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Hi Brendan, unfortunately I couldn't make it in there tonight and I just wanted to wish this the best of luck. I do hope that the bill has some piece in it that ensures that Philip Lane or whoever is supposed to help ordinary consumers is made do their job, the one they don't want and that it continues to be enforced into the future.
 
I was foolish to think that this Bill would make any difference.

Mortgage Rates will only change if banks voluntarily reduce them like AIB did.

Or if mortgage relief is given to everyone.

This bill will take at least 2 years to be approved with this shower.

I give up. Im going into my own provider and AIB and going to try everything to switch including getting a solicitors letter.

The government are unwilling and powerless to fix this and im sick of waiting.
 
Brendan Burgess said:
Does anyone know what actually happened?

Did FG manage to kick the Bill to touch?

Brendan
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For whatever reason Michael Noonan doesn't want this bill to pass, he may not get his wish though. Below is what FG want, but may not get.

"A Government spokesperson said today it will try to move a reasoned amendment to this bill in the Dáil.If this was successful it would take the bill off the floor of the Dáil and it would instead be considered under what is called pre-legislative scrutiny.The spokesperson said both Fianna Fáil and Fine Gael want the same outcome but they said Fine Gael also has to stand up for it believes to be the right thing".
 
An interesting comment from Ciarán Hancock in today's Irish Times

Issue of variable mortgage rates not going to go away

"McGrath is open to the banks taking matters into their own hands by voluntarily lowering their rates. They might do well to bite this carrot before the politicians fashion a stick to beat them with."

This would be a good outcome. If the lenders rendered the legislation unnecessary by reducing their rates towards the Eurozone levels.

"In private briefings the Central Bank has warned that there could be a number of unintended consequences from enacting this Bill into law, and has tried to explain the various legacy factors that feed into the pricing of variable rates by the five players left standing in the market."

I am really astonished how the media is actually paying any attention to the Central Bank's comments on mortgage rates.

Honohan said that control of interest rates could be justified.

The Central Bank has been deliberately publishing misleading data to pretend that Irish mortgage rates are lower than they actually are.

My views are hardening on this issue. If the Central Bank is not going to get involved, then bring in a statutory cap of 3% above the ECB rate - no exceptions.

Brendan
 
Noonan is showing his true colours, fighting against a just cut for 300,000 variable rate customers.

What does that say about other policies during the previous government?
 
A powerful article by Charlie Weston in today's Indo

Variable rate bill is vital - despite Central Bank's discomfort

A great summary of the arguments

"But it is a problem of the Central Bank's own making. It has consistently failed to do anything about interest rate gouging by the banks. The issue affects 300,000 mortgage holders on variable rates.

Up until recently, the Central Bank was producing figures on mortgage rates that understated the extent of the rip-off, until this was exposed by consumer advocate Brendan Burgess and the Irish Independent.

Variable rates here are twice what they are across the Eurozone, something that has been consistently highlighted by this newspaper.
...

None of this is comfortable for the Central Bank. It does not want to be able to regulate mortgage rates, and is unlikely to use such powers if it gets them.

However, it is hard to have sympathy for the Central Bank - as it has consistently put the interests of banks ahead of those of consumers on the variable rate issue. If it is feeling the heat on the topic now, hard luck."
 
OPPORTUNITY MISSED
Hi all I wanted to comment on this important issue for affected customers. There is currently (and has been since May 2009) an opportunity for borrowers to
de-leverage the levels of debt with the current low ECB and lending rates (in other countries) but the opportunity for Ireland will not last forever.

It seems totally unfair that these very lenders can be afforded time to get their books in order but to do it to the detriment of their customers is totally wrong. Our government can today borrow at approx 0.8% for 10 years and yet the customers of our lenders are paying 4% or greater for SVR's. Investors with Rentals interest rates can be in excess of 6% and commercial loans are in excess of 7% in some cases.

Added to this is the frustration of 15 year fixed rates in Europe at approx 2.15% and Tracker loans being available in the UK.

And Minister Noonan's reply is that competition will correct matters!!!!!!!!!!!!!!

This avoids the fundamental question of "What happens when EBC rates turn" the opportunity to lower the levels of debt for people in this country will be lost and this unique opportunity will have been missed. More importantly the opportunity to lower debt levels in Ireland will have been used, incorrectly in my view, only to restore profit levels to our lenders.

Well done Brendan and I will be there tonight to lend support to this important issue. It is not simply a request to reduce interest rates, the bigger picture needs to be looked at here and the opportunity cannot continue to be missed.

A more forward thinking approach with the customers in mind which will better the economy on a wider scale with reduced debt levels should be the desire of all
Padraic
 
Brendan Burgess said:
None of this is comfortable for the Central Bank. It does not want to be able to regulate mortgage rates, and is unlikely to use such powers if it gets them.
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And yet this ineffective legislation is somehow "vital"? The logic escapes me.

I really wish the Indo would stop repeating the myth that variable rates in Ireland are twice the Euro Zone average - this is simply untrue.

The average (median) rate on all outstanding variable rate mortgages in Ireland is almost exactly the same as the average rate on all outstanding variable rate mortgages across the Euro Zone.
 
Sarenco said:
I really wish the Indo would stop repeating the myth that variable rates in Ireland are twice the Euro Zone average - this is simply untrue.
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It's unlike you to make such a claim without clarifying what you mean.

The new business rate in Ireland is 3.7% compared to 2% across the Eurozone. You know that is true.

The gap is coming down so it's no longer twice, but it is still substantially ahead.

Brendan
 
Brendan Burgess said:
However, it is hard to have sympathy for the Central Bank - as it has consistently put the interests of banks ahead of those of consumers on the variable rate issue. If it is feeling the heat on the topic now, hard luck."
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I guess this sums up the situation nicely - the banks and central bank have backed themselves into a corner. They have two options - fight it to the bitter end or avoid the situation by agreeing to drop the interest rates across the road

It is worth noting that the share price of BoI has dropped approximately 15% in the last 3 weeks (27.1c to 23.2c). If the market is acting on this like Minister Noonan claims, then they are factoring in a reduction in profits either way.
 
Sarenco said:
The average (median) rate on all outstanding variable rate mortgages in Ireland is almost exactly the same as the average rate on all outstanding variable rate mortgages across the Euro Zone.
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Yes, I don't think anyone is disagreeing with this point. Statistics can be used to say anything. That said, statistically, averages & medians should also be used in conjunction with Standard Deviation, which of course would give a very different story.

However the point is the new business rates are close to double the eurozone average- which I assume we all accept.
 
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