Sara Hogan: I want justice for PTSB variable rate customers

[Brendan Burgess]

From today's Indo

http://www.independent.ie/opinion/c...or-ptsb-variable-rate-customers-31135397.html

A very good article.

 

[hughes]

Great to see this issue bring highlighted once again. Sara deserves great credit for speaking out..........the response from Central Bank / Government / Banks is now eagerly awaited.

 

[futures]

what's so good about this article? Extraordinarily tendentious!

She doesn't even mention the interest rate when she took out her mortgage. Her complaint is not so much the interest rate but the fact that others are paying less.

The parable of the vineyard workers comes to mind

She doesn't mention that PTSB is still a loss making bank or that arrears are the real reason for her plight!

 

[Brendan Burgess]

what's so good about this article?

Hi futures

It's good for a number of reasons:

• It's different in that few people talk about their finances in public, much less write about them
  
• It sets out the case for a cut very well
• It points out how quiet people are about their mortgage rates, while marching about much smaller water charges
  
• It calls for action

I think it will motivate people to overcome their inertia and try to resolve this problem.

She doesn't even mention the interest rate when she took out her mortgage.

I am not sure of the relevance of this. I presume that when she took out the mortgage in 2009, ptsb's rates were comparable to the other lenders. Back in 2009, higher rates may well have been justified. But it's also possible that Irish borrowers were being fleeced back then as well.

Her complaint is not so much the interest rate but the fact that others are paying less.

Yes, that is her point?

Why should she be paying more than ptsb's new customers?
Why should she be paying more than the average mortgage rate in the Eurozone?

She doesn't mention that PTSB is still a loss making bank or that arrears are the real reason for her plight!

When I appear on radio or TV, I often get a similar criticism that I did not mention point x or point y. She is not writing a comprehensive report for the government on the reasons for high interest rates in Ireland. She is writing an 800 word article which she wants people to read and maybe study the topic further. I am sure that there is a lot more she would like to have said.

 

[MorgVar]

what's so good about this article? Extraordinarily tendentious!

She doesn't even mention the interest rate when she took out her mortgage. Her complaint is not so much the interest rate but the fact that others are paying less.

The parable of the vineyard workers comes to mind

She doesn't mention that PTSB is still a loss making bank or that arrears are the real reason for her plight!

Futures I fail to see the point of your comment. Is your motive to pick holes in this excellent personal article or to support this campaign?
Are you personally affected and what are doing to rectify situation?

 

[PTSBCase]

Well done Sara. Great article!

 

[Bronte]

Futures I fail to see the point of your comment. Is your motive to pick holes in this excellent personal article or to support this campaign?
Are you personally affected and what are doing to rectify situation?

I too want to know what Sara was paying in 2009 and what the margin was. And it is correct to say that Sara's real issue is that others are paying less. Something I mentioned elsewhere on here.

But I thought she wrote an excellent article and was very brave to come out in public with her personal circumstances and she was dead right to stand up and be counted at the shareholder meeting.

 

[Duke of Marmalade]

When our third child came along, it no longer made financial sense for me to continue working. As a result, we would no longer meet the lending criteria to allow us to switch to another lender; we are, in effect, prisoners of Permanent TSB.

This is a slight weakness in Sara's argument. It implies that the Permo are not charging her over the "market rate", she is unable to refinance in the market. She appears to approve of other differentiating factors such as LTV but does not accept that income capacity should be such a factor.

It remains, of course, that the "market" is dysfunctional by European standards.

It is depressing that looneys like Gene Kerrigan are jumping on the bandwagon - this one is in danger of getting out of hand like the water charges before it.

 

[Sarenco]

Why should she be paying more than ptsb's new customers?

Because she presumably wouldn't qualify for a mortgage at the same rate as new PTSB customers due to the higher LTI. If Sara's LTI was lower then presumably she could refinance with another lender. As it stands, she is a higher risk borrower from a lender's perspective and therefore pays a higher interest rate.

To describe herself as a prisoner of PTSB is disingenuous.

 

[Jim2007]

Why should she be paying more than ptsb's new customers?

It is very simple, she bought the product at a different time and price, so there is no reason to expect the product to be the same as the current offering. If we were talking about a car rather than a financial product, would she be demanding that the car dealer go fit the same features to cars they have already sold??? or perhaps give a rebate because the price of steal has dropped since she bought the car. Of course not.

Why should she be paying more than the average mortgage rate in the Eurozone?

Because the products are not the same! For instance in Germany most banks will only offer 70% of their assessed value of the property, which may be very different to the current market rate and the time scale is usually 10 years. On top of this you need to substantial other assets and income before they'd consider you, so a 20% deposit and nothing left in the savings account would not fly. The reality is that most Irish mortgages would be considered subprime in a Euroland context and would have to pay substantial higher rates than the average in any case.

 

[Dermot]

Yes Sara makes her own case well.
The reality out there is that PTSB is essentially a one trick Bank providing mortgages.
It is still a loss making Bank and in order to stay in business it needs to become profitable very soon and that means having to charge higher interest rates and/or cut costs.
If it continues to be loss into the future it will make its cost of funding higher which will make things worse for the PTSB and could have to be taken over by another of our own lenders.
If this happens we will end up with one less mortgage provider and will make things worse.
PTSB as I understand it have a higher than normal amount of non performing mortgages.
We need to grow up as a country that there is a linkage between the 300,000 people on high SVR mortgage rates and the low amount of repossessions.
We as a country want lower SVR's/No repossessions and 10% deposits. Two of the 3 aforementioned items are not very practical so make up your own mind.
We have the highest SVR's in Europe but we have the lowest repossession rates in Europe for non performing mortgages.
We have the costliest repossession system in Europe also.
I have sympathy for people on high SVR's but everyone of those who can switch to a lower rate Provider should do so now and not be waiting in hope for other people to do it for them. People need to get up off their a...s and do something for themselves as well. If I was effected I would have done it.
I cannot see what any Government can do to lower the Interest rates and I think that politicians who say otherwise are being disingenuous. They can create moral pressure but little else.

 

[Brendan Burgess]

1) "Sara is not the same as the others because she does not meet the Loan to Income criteria"

Irish lenders do not give lower rates to people with lower LTI ratios. The main risk comes from LTV and that is how the lenders price their mortgages. Sara is a 60% LTV customer with a clean ICB record. I see no reason for justifying a higher charge for her.

But even if this were justified, the reality is that the bank ignores the LTI ratio. New customers get better rates than existing customers with the same LTV and LTI ratios. That is fundamentally unfair.

 

[Brendan Burgess]

It is very simple, she bought the product at a different time and price, so there is no reason to expect the product to be the same as the current offering. If we were talking about a car rather than a financial product, would she be demanding that the car dealer go fit the same features to cars they have already sold??? or perhaps give a rebate because the price of steal has dropped since she bought the car. Of course not.

Hi Jim

That comparison is not appropriate at all. If I buy a car today for €20,000 and a year later, the price drops to €18,000, I have no case.

But that is a one off purchase.

A loan agreement is a continuing agreement. Existing customers should be given the same terms as new customers.

 

[Brendan Burgess]

Because the products are not the same! For instance in Germany most banks will only offer 70% of their assessed value of the property, which may be very different to the current market rate and the time scale is usually 10 years. On top of this you need to substantial other assets and income before they'd consider you, so a 20% deposit and nothing left in the savings account would not fly. The reality is that most Irish mortgages would be considered subprime in a Euroland context and would have to pay substantial higher rates than the average in any case.

This is a generally fair point. It certainly seems fair to me that Irish mortgages should be a bit dearer than other Eurozone countries because of the legal difficulties. But not 2% dearer than the average.

I would not lend 90% LTV mortgages in Ireland. I think that is madness. And maybe 4.5% variable rates are justified.

However, 60% LTVs are very low risk and I think that they should be priced at levels similar to the Eurozone average.

And when the ECB says that 2.09% is the Eurozone average, there is a range of rates, mostly falling between 1.5% and maybe 3%.

The absolute lowest rate in Ireland is 3.55% with KBC.

In Northern Ireland, someone with a 60% LTV can get a tracker at around 2.3%.

 

[Duke of Marmalade]

1) "Sara is not the same as the others because she does not meet the Loan to Income criteria"

Irish lenders do not give lower rates to people with lower LTI ratios. The main risk comes from LTV and that is how the lenders price their mortgages. Sara is a 60% LTV customer with a clean ICB record. I see no reason for justifying a higher charge for her.

But even if this were justified, the reality is that the bank ignores the LTI ratio. New customers get better rates than existing customers with the same LTV and LTI ratios. That is fundamentally unfair.

Sara states that she cannot refinance because she does not meet the income requirements. That to me is the ultimate form of applying LTI criteria

Sara describes herself as a "prisoner" of PTSB but that does not seem to be because the PTSB have thrown away the key; they appear to have left her cell door wide open but nobody else wants to take her in. The PTSB are no more to be criticised for this situation than the others for their failure to provide Sara cheaper terms. Sara is a victim of a dysfunctional market not of one particular agent in that market. And the dysfunctionality of the market owes a lot to the culture of non repossession.

 

[Jim2007]

Hi Jim

That comparison is not appropriate at all. If I buy a car today for €20,000 and a year later, the price drops to €18,000, I have no case.

But that is a one off purchase.

A loan agreement is a continuing agreement. Existing customers should be given the same terms as new customers.

On the contrary, a bank builds a financial product in a similar way to a car manufacturer builds a car. They will try so far as possible to lock down the financing for the product and the income stream at the point of sale, just like a car dealer. So yes products created and sold during periods when financing cost were high will cost more than ones created and sold during periods when financing is cheap. There is nothing new in this and Ireland is not some kind of special case! It's the same in Germany or Switzerland for that matter, I pay a higher mortgage rate than my neighbour because I financed several years ago, where as he only took out his loan last year. That is just how it is.

 

[Jim2007]

However, 60% LTVs are very low risk and I think that they should be priced at levels similar to the Eurozone average.

The point of valid if and only if Irish banks can gain access to long term financing at those rates. Which I doubt because there are very few mainland European lenders that are willing to go beyond say 10 years when it comes to securitisation.

 

[Duke of Marmalade]

On the contrary, a bank builds a financial product in a similar way to a car manufacturer builds a car. They will try so far as possible to lock down the financing for the product and the income stream at the point of sale, just like a car dealer. So yes products created and sold during periods when financing cost were high will cost more than ones created and sold during periods when financing is cheap. There is nothing new in this and Ireland is not some kind of special case! It's the same in Germany or Switzerland for that matter, I pay a higher mortgage rate than my neighbour because I financed several years ago, where as he only took out his loan last year. That is just how it is.

Jim I gotta agree with the Boss on this. We are talking about the Standard Variable Rate, you seem to be addressing fixed rate financing. The idea is that the rate should vary in line with the cost of funds, the Tracker Mortgage being the epitome of the genre.

The Tracker contractually follows what was supposed to be an objective measure of the cost of funds. With SVR the relationship with cost of funds is not contractual but is meant to be underpinned by market competition - if your lender does not follow the cost of funds, you walk. This is as it always has been.

There are two issues with this from a customer point of view: (a) what if the market itself does not follow the cost of funds? - this appears to be the case today in Ireland. (b) what if your (perceived) credit worthiness deteriorates? It usually happens in the other direction, your creditworthiness improves as the loan gets paid down. In Sara's case because of a life event her perceived ability to service a mortgage to maturity has deteriorated. Contrary to Sara's claims but totally supported by her transparent disclosure Sara is not being forced to pay more than someone in a similar position, whether new or existing.

 

[Bronte]

1)
New customers get better rates than existing customers with the same LTV and LTI ratios. That is fundamentally unfair.

No it is not unfair. It has always been the case that new customers get a better deal. It's an enticement to pick a particular bank, a marketing ploy. Ditto for switchers. Loss leader if you will. If you don't like it, then you lock in your preferred rate for certainty.

 

[Brendan Burgess]

Hi Bronte

The fact that it has always been this way does not mean that it isn't unfair.

Other industries offer "50% off the first six months" "offer available to new customers only". I could live with that, although I think it would be better to reward existing customers.

But mortgages are different - they are charging a different rate for the duration of the contract because they can.

Brendan