On high interest rates in 2008. Based on available research at the time, it was unlikely that the ECB rates could get higher than 4-5% but perhaps I was misreading the situation. Countries that joined the eurozone had their sovereign bond and private bank borrowing costs all reduced dramatically, that was the point of being in the common area. Anyway, it is obviously true nobody can predict the rates in the future short term, but one can assume that they go up and down over long period of time. What is wrong with that assumption? In the last 4 years when the rates are down, SVR did not follow. I did not see it coming. I find it unexpected.
Do you dispute the argument that the SVR should vary depending on funding costs for the bank? As in Webster's definition of "variable": "able or apt to vary
, subject to variation or changes." This is how the mortgage was explained to me by the bank. I think it is a reasonable assumption when you take the mortgage at the time when the rates are high to expect that when they go down you would be able to overpay and thereby reduce the principal.
Also, what is wrong with the assumption that a regular civilian who only observed few data points (a dozen of houses) is less knowledgeable than the expert (bank) who observed hundreds of thousands of data points, over time. That regular civilian customer trusts the bank where he holds his account to be conservative about lending for a 30 year term. But I seriously doubt they did any stress-test at the time, not that I knew what was a "stress-test" in 2008. I expected the bank would not be cavalier with their credit, it is a lot of money. I bought in 2008 but not after the bust. Prices were slowly declining over the summer, but there was no bust until after September, at least in my area. Boucher in May 2015 admitted publicly that the BOI was experiencing significant uncertainty over the summer 2008. Was it that difficult for the bank to suspend lending if they knew or were uncertain? They did not care.
How else but not to treat mortgage payments in a cavalier fashion after it? You put your life on hold, sacrifice immediate consumption for saving, live like a dog in a rented accommodation, save for a down payment. Meanwhile, my peers get 100% mortgages. The banks, by providing 100% mortgages and spreading the credit to people who were unable to save, inflate the house prices even higher so then even people who are able to save and do not consume, have to borrow much more than they could have, or should have. Then the bank provides a property assessor who endorses the price as valid. You negotiate and reduce the price. The same property assessor endorses the new price as valid again. In retrospect I am not even sure that assessor was even sentient. You buy a house. The prices drop, even though you paid 25% in own money, you are in a negative equity or near. The property assessor cannot be hold accountable for the estimates. People who borrowed 100% on a tracker pay less than you. Finally, when you approach the bank about SVR reduction in 2015, they tell you your current LTV is too high, that is my previous LTV of 75% and my money is treated like they never existed.
I know it is gone but I still remember my money like a phantom limb pain
So what would you do if you were me, shut up and be happy? I had been happy until I encountered the BOI on my path.
PS Alas, TRS is 15% not 30% until 2017 (look up, this is true). I am obviously grateful to an average taxpayer alongside other TRS recipients but in retrospect i wonder if everybody would have been better off without it from day one, then people taking mortgages would have estimated better what they were to pay as TRS really worked as a subprime teaser rate of sorts.
oh, well.