New mortgage lender to shake up market

Discussion in 'The Fair Mortgage Rates Campaign' started by todo, Feb 5, 2016.

  1. todo

    todo Frequent Poster

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  2. Brendan Burgess

    Brendan Burgess Founder

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    Great news indeed.

    "It is understood the operation is funded from pension funds in Ireland and Europe."

    This makes a lot of sense. AIB issued bonds recently at around 0.6%. I presume Irish pension funds were buyers of these.

    So an Irish worker puts money in their pension fund at 0.6%
    Then they borrow it back at 3.55%

    AIB gets a margin of 2.95% to facilitate a person to lend their own money to themselves.

    Crazy stuff.

    A pension funded mortgage provider might have different objectives to the profit maximising banks.

    Brendan
     
  3. gnf_ireland

    gnf_ireland Frequent Poster

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    Obviously this is fantastic news, and would be great for the fair mortgage rates campaign

    @Brendan Burgess is it worth trying to arrange a meeting with Mr Cunningham in advance of its 'pending' launch and see if it would be possible to outline some of the main issues with the current lending practices and ask him to consider addressing some of them contractually in their mortgage agreements - e.g. treat existing & new customers fairly and set a maximum cap the mortgage rate in the event they go out of business etc (or maybe in general)


    It will also be interesting to see if they offer incentives to switch (legal contribution) or cashback offers (with clawback)

    I will definitely be interested in switching again, but would be good to see what their mortgage agreement states on commitments to the customer (once bitten and all of that)
     
  4. gnf_ireland

    gnf_ireland Frequent Poster

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    It would also be good to know if they support the re-drawdown for overpayments KBC currently do, and even the payment holiday for overpayments PTSB does.

    These are things that they could compete on easily enough without a financial impact to them.

    Surely banks should be encouraging overpayments where possible !
     
  5. Clonback

    Clonback Frequent Poster

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    I welcome the arrival of Frank and provided they offer a variable rate c.2.7% I will switch immediately.Jumping through a few hoops to save .75% makes it work for me.Hopefully the C.B. issues approval quickly.
     
  6. Cervelo

    Cervelo Frequent Poster

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    Last edited: Feb 5, 2016
    Can I ask why you think they would offer a c2.7% rate, all they have to be is be slightly cheaper then the cheapest rate available
     
    Last edited: Feb 5, 2016
  7. Sarenco

    Sarenco Frequent Poster

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    Why do you say that?
     
  8. Black_Adder

    Black_Adder Frequent Poster

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    I note that the Independent article mentions Northview (aka Kensington Morgages) as another potential entrant. Essentially a sub-prime lender and I am not sure that they would be at all interested in competitive rates (as defined as sub 3%).
     
  9. WorstPigeon

    WorstPigeon Frequent Poster

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    Not the person you were replying to, but if they offer rate just slightly better than the current best deals, they'll get some customers, but those offering the current best deals may come down a bit to meet them. If they offer a really good rate but are picky about who they accept, though, they could grab a large number of high quality, low risk loans.

    2.7% seems kind of optimistic, granted.
     
  10. inaquandert

    inaquandert Frequent Poster

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    This would be great - I hope it's true
     
  11. Brendan Burgess

    Brendan Burgess Founder

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    I understand from the article that he is not commenting at the moment. They are waiting for approval from the Central Bank and I guess that they don't want to jump the gun.

    I have copied this to a new thread:

    What features would a fair mortgage have?
     
  12. gnf_ireland

    gnf_ireland Frequent Poster

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    While I fully understand the banks make money on the interest charged, and the lower the principal the less interest being charged, I also assume that the main-stream banks would prefer to have higher quality loan assets on their accounts. Surely overpaying, and the ability to regularly overpay, increases the quality of the asset, and therefore is less risky.

    The bank is in effect getting a higher return for a less risky asset via overpayment - but then again we may all have different views on this.

    I personally believe that the mortgage rate you are on should reflect the LTV you signed up on, and should not move during the lifetime of your mortgage unless you switch providers. But I know others believe differently on this point.
     
  13. Brendan Burgess

    Brendan Burgess Founder

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    Less risky, but a lot less profitable.

    Bank of Ireland is better off getting 4.5% on a mortgage of €300k on a house worth €500k, than getting 4.5% on a mortgage of €100k on a house worth €500k

    Of course, BoI would far prefer a mortgage of €100k on a house worth €200k, than a mortgage of €300k on a house worth €200k.,

    Overpayment only suits the bank when the loan is a cheap tracker or where the house is in negative equity.

    If the borrower can withdraw the overpayment, I am not sure if it suits the bank that much if the loan is in negative equity.

    Brendan
     
  14. CiaranT

    CiaranT .

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    Last edited: Feb 15, 2016
    The Frank Mortgage have a website set up here now. Albeit, not all information is on the site yet.

    Website says they are still waiting for CBI approval.

    One can register for updates.
     
    Last edited: Feb 15, 2016
  15. newirishman

    newirishman Frequent Poster

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    "Not all information" is an understatement. There's literally no useful information at all available at this point.
    Anyways, registered for updates so let's see.
     
  16. CiaranT

    CiaranT .

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    The website is clearly in an early stage of development.
     
  17. gnf_ireland

    gnf_ireland Frequent Poster

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    Anyone got any more details on this yet? Would be interesting to hear any insider knowledge people may have :)
     
  18. Brendan Burgess

    Brendan Burgess Founder

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    Charlie Weston has an article on it in today's Indo

    New lender aiming to undercut banks on mortgage rates

    "Frank Money is aiming to have mortgage rates of 2.8pc - some 0.5pc lower than the best variable rates offered by the banks.

    The new lender is awaiting approval from the Central Bank to enter the mortgage market, and will be targeting switchers and new borrowers once it gets authorisation.

    ...

    There is some frustration among brokers that it is taking the Central Bank months to approve Frank Money's application to become an authorised mortgage lender.

    This is despite Central Bank Governor Philip Lane blaming a lack of competition in the home-loans market for the fact that variable rates in this country are the highest in the eurozone."

    Does Frank not realise that the last thing which the Central Bank really wants is competition driving down prices? The Central Bank wants the banks to continue fleecing mortgage holders so that they build up their profits and capital.

    Brendan
     
  19. Sarenco

    Sarenco Frequent Poster

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    It's a pity there is no comment or reaction on behalf of Frank Money in the piece. Beyond guessing, we are really none the wiser as to the real position.
     
  20. newirishman

    newirishman Frequent Poster

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    Is this you guessing or do you have some background information available?

    According to the CRO, the "Frank Money limited" was registered on Dec 19, 2015 so lets assume that within a week or so they would have submitted the license application.
    The Central bank process is described here: https://www.centralbank.ie/regulation/industry-sectors/retail-credit-firms/Pages/authorisation.aspx

    The relevant SLA's seem to total up to a max of 100 business days (10+90) - which is just under 5 calendar months - if there aren't any questions with the application. One would expect that there is a bit of back-and-forth if it is a new entrant to the market.

    Whilst there doesn't seem to be too much of a rush with it, I don't see anyone purposefully delaying it either.