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

[demoivre]

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.

Is that true for the most typical variable interest rate charged in Ireland and the EU?

 

[gnf_ireland]

Is that true for the most typical variable interest rate charged in Ireland and the EU?

I believe so, if you include the low cost trackers from the Celtic Tiger years. I don't believe @Sarenco would have any reason to lie on this discussion (even if our views differ on some things)

So 1 person on 1%, 1 person on 5% and 1 person on 3% - median & average = 3%. However to new business the 1% and 3% options not available - only the 5% one !
Statistics can prove anything !

 

[demoivre]

I believe so, if you include the low cost trackers from the Celtic Tiger years. I don't believe @Sarenco would have any reason to lie on this discussion (even if our views differ on some things)

So 1 person on 1%, 1 person on 5% and 1 person on 3% - median & average = 3%. However to new business the 1% and 3% options not available - only the 5% one !
Statistics can prove anything !

I know that and as there are five measures of average I was curious as to what the modal value was for variable interest rates in Ireland and the EU.

 

[gnf_ireland]

there are five measures of average

Mean, Median, Mode, Mid-Range - which one am I missing

No idea of whether the 'mode' is available

 

[rodger]

So what we're saying is the high variable rates are subsidising the trackers

And that's fine

Average is correct

What's the problem?

 

[gnf_ireland]

So what we're saying is the high variable rates are subsidising the trackers

I don't think anyone is saying that SVR's are subsidising trackers. At least not currently (maybe in the past). Brendan has a post here to say that the cost of funds with PTSB is 0.55% - doubt there are many trackers at that level around

Average is correct

Any 'Average' figure should be used with deviation from it. This shows a very simplistic view of any situation.

What's the problem?

I assume this piece is satirical

 

[Sarenco]

It's unlike you to make such a claim without clarifying what you mean.

Not sure what you mean Brendan, I thought I was pretty clear what I meant in the following sentence:-

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.

It is obviously the case that variable rates on new loans are higher here than in the rest of the Euro Zone. It is also equally true that the reverse was the case a number of years ago. The average of all outstanding variable rates includes both sub-sets of home loans.

 

[Sarenco]

I know that and as there are five measures of average I was curious as to what the modal value was for variable interest rates in Ireland and the EU.

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.

The median figure certainly includes trackers - practically all variable rate home loans written on the continent are actually trackers (typically a margin over 6 or 12-month EURIBOR).

For reference, the average effective rate on all outstanding variable rate loans in France (as calculated and published by the French Central Bank) over the last quarter is 2.66%. I suspect that is slightly higher than the equivalent figure in Ireland, bearing in mind that more than half of all outstanding Irish variable rate mortgages (including trackers) are currently at a rate of less than 1.25%.

 

[Sophrosyne]

I watched the debate on Oireachtas.ie.

Michael Noonan proposed that the Bill be delayed for 6 months in order for it to be scrutinized by a select committee to examine and address:

· the major constitutional issues raised by the Bill,

· the obligation to consult with the ECB on legislation of this nature,

· the CB’s stated position on this issue,

· the importance of competition as a sustainable and long-term solution to this issue and

· the possibility that this Bill may have unintended consequences.


Pearse Doherty disagreed with the 6-month delay and while he accepted that the Bill was flawed he felt that whatever was wrong could be amended at committee stage.

I thought that Catherine Martin, Green Party, made some excellent points.

She said;

“I commend the efforts of Deputy McGrath who has been a constant voice in this area and I agree with him that banks will not act voluntarily and must be forced.

Where I take issue however, is with the current Bill before the House.

It is drafted with such infirmities that it could never, in its current state, hope to see the light of day. It will not pass the test of constitutionality and would inevitably be struck down.

The bank knows this, the civil servants know this, the government knows this, so lets not give them all an I told you so moment in the sun.

Yes there is a process at committee stage where Bills can be amended, but this Bill cannot be amended for it is inherently and fundamentally flawed.”

She proposed that the Bill, in its current state, be withdrawn and represented as soon as possible once it is capable of passing the basic test of constitutionality.

Her full speech is worth hearing.

First part – at 57:38 minutes on this link:



Remainder of speech at this link:

 

[rodger]

The median figure certainly includes trackers - practically all variable rate home loans written on the continent are actually trackers (typically a margin over 6 or 12-month EURIBOR).

For reference, the average effective rate on all outstanding variable rate loans in France (as calculated and published by the French Central Bank) over the last quarter is 2.66%. I suspect that is slightly higher than the equivalent figure in Ireland, bearing in mind that more than half of all outstanding Irish variable rate mortgages (including trackers) are currently at a rate of less than 1.25%.

Let's try to compare like with like

First off Irish trackers are not relevant to the discussion

 

[Sarenco]

First off Irish trackers are not relevant to the discussion

Ok, then presumably trackers written elsewhere in the Euro Zone are equally irrelevant to this discussion so can we please stop making inaccurate comparisons?

Average variable rates in Ireland are not double average variable rates elsewhere in the Euro Zone - that's the only point I'm trying to make.

 

[gnf_ireland]

practically all variable rate home loans written on the continent are actually trackers (typically a margin over 6 or 12-month EURIBOR).

I think the key point on the whole discussion is listed in the above line...

On the continent, the vast majority of variable rate home loans are tracked against EURIBOR. This means that if I go to 3 banks tomorrow, and get mortgages offers off them, the best one will remain the best one for the duration of the mortgage. The customer can compare them, and are making decisions on LONG TERM comparisons.

The customer's on the continent are not left at the mercy of any given institution, or left vulnerable if the mortgage is sold on. The variable home loan is variable against something outside an individual banks control.

We need to return to variable home loans tracking SOMETHING meaningful, or cap the movement of the variable home loan within an agreed margin of tolerance.


Pure SVR's in Ireland are simply contracts in favour of the bank and 'abusive' towards the customer. Any commercial agreement should work for both parties and one party should never have a completely dominant position

PS: I do know people will say that no one is forcing anyone to talk out a mortgage they don't agree with, but the reality is society today needs a functioning banking sector!

 

[Sarenco]

We need to return to variable home loans tracking SOMETHING meaningful, or cap the movement of the variable home loan within an agreed margin of tolerance.

Or alternatively borrowers could opt for fixed-rate home loans, which they are doing in increasing numbers.

 

[gnf_ireland]

Or alternatively borrowers could opt for fixed-rate home loans, which they are doing in increasing numbers.

Fixed rate home loans do not suit everyone - myself for example who is trying to clear down the mortgage as quickly as possible. However, this is not about me personally

I would be in favour of at least the option of longer term fixed rate home loans - so 15 or 20 years in duration. This is something which is also common on the continent also, but I understand more relevant at lower LTV's. This would obviously remove the need for stress testing a mortgage application, and would provide long term certainty into the repayments.

One possibility might be to support a 'break' clause every 5 years or so, where the mortgage could be paid back in full with no penalties (effectively allowing the mortgage holder to switch). This would hopefully average out any major fluctuations in interest rates over the lifetime of a mortgage.

I do wonder, given the fuss made around the Central Bank deposit rules, whether Irish people who also be so willing of the LTV rules on the continent, which I understand to be much tougher in general !

 

[bdecuc]

Great to see the bill pass second stage. Well done Brendan and all. And fair play to Michael McGrath for keeping with this.

Hopefully there's proper engagement from all sides in committee stage to make the bill an effective tool to help fix the mortgage market. I'm sick to the teeth of paying 4.3% and more to PTSB. Unjustifiable gouging.

 

[Clonback]

Brendan
Your perseverance and consistency has got a just reward tonight.
Well done.

 

[inaquandert]

I hope no one ever trusts a bank to do anything voluntarily. Shame on Michael Noonan and fg for not doing somrthingbabout this sooner. Well done Brendan. Well done ff. I look forward to the day when my SVR is reasonable

 

[Sarenco]

Yes, congratulations to all who supported the Bill.

I'm curious whether anybody (other than Michael McGrath) actually spoke in favour of the Bill during the debate. I haven't listened to all the contributions to the debate as yet but everybody I have listened to so far either said the Bill was "flawed" or "fatally flawed". And yet it passed to the next stage.

Am I alone in thinking that the much vaunted "new politics" looks very much like business as usual?

Surely we should be entitled to expect elected representatives to vote against proposals they disagree with and yet that doesn't seem to have happened on this first test of the new electoral dispensation. I really don't understand politics...

 

[Sarenco]

I do wonder, given the fuss made around the Central Bank deposit rules, whether Irish people who also be so willing of the LTV rules on the continent, which I understand to be much tougher in general !

A number of UK mortgage lenders tried to launch long term fixed-rate mortgages a few year years ago but they were quickly discontinued due to a lack of interest. The honest truth is that borrowers in this part of the world do not want to pay the premium associated with the security offered by term fixed-rate mortgages.

 

[gnf_ireland]

The honest truth is that borrowers in this part of the world do not want to pay the premium associated with the security offered by term fixed-rate mortgages.

I guess it depends on the rate offered - a 20 year fixed mortgage at say 4% would probably be attractive to a lot of people. The same mortgage at 6% or 8% would not be as attractive.