Should tracker mortgages be levied so that non-trackers don't subsidise them?

But the bank officials themselves justify the high costs of SVR by referring to the loss-making tracker mortgages. In a series of meetings with Noonan this argument appeared time and again.

To be fair, I don't think it's true that any senior bank officials have actually tried to justify SVRs by reference to "loss-making trackers" in recent times. Certainly no senior bank official tried to make this case before the Finance Committee.

Even the main stream media has now (generally) stopped referring to "loss-making" trackers and now, more accurately, refer to "low yielding" or "low margin" tracker mortgages.

The vast majority of tracker mortgages were written between 2004-2007 (at the height of the property bubble) and there is a good deal of evidence (including a recent Central Bank publication) that demonstrates that average SVR mortgage payments are not, on average, much different to average tracker mortgage payments when you take account of the higher outstanding amount of the average tracker mortgage.

Trackers now represent a minority of outstanding mortgages and their share of the market will continue to fall over time.
 
Well, you may be right regarding the official line on "loss-making trackers", I almost swear I saw in the transcripts but perhaps it was among questions or the media commentary. But even if you rephrase it from "loss-making" to "low yielding", it does not really make it that different.

As I see it, customers were allocated into two groups by a lottery-like process in 2004-8. This product affects you for life. Even if you become the safest borrower possible, you reduce your LTV, etc etc, you cannot join the ranks of trackers no more. You remain on a higher rate for life no matter what. I find the examples people used in this thread to justify trackers, i.e., "should we also subsidize credit card debt" and what have you, these examples are cute but they are somehow off.

Lets focus on the same product market. If the banks charge mortgage-holders a higher interest because some customers default or do not pay or banks sustain other property-related losses, it means that mortgage market pools risks somehow, so even a good customer who never defaults pays more because some in that pool would default, correct? Same for car insurance - drivers who constantly crush cars will get a a higher premium, but every driver would pay more as a result. Now imagine in 2004-8 the insurers introduced a car insurance product so that customers pay car insurance that is fixed at 5% over German car average annual insurance, and that insurance contract is for life. And half of car drivers took it. And then because cars get older in Ireland, there are more younger drivers, more crushes, "lawyers entered the market", etc, insurers have to increase their premiums dramatically, but they can only do so for regular customers, not for "car insurance trackers". Even if car insurance trackers are not loss making, and only low yielding, insurance companies still need to recoup the losses and raise premia for everybody else but not for "car insurance trackers". Why should other drivers pay more only because the insurers issued an idiotic product in the past? Surely the government needs to step in and regulate?

Same with mortgages. Banks need to finance losses from defaulters but they can only do so by extracting from SVR holders. Now imagine that the current "emergency" 0% ECB rate continues for a long time. Hopefully. Even if proportion of trackers decreases, "low yield" continues, everybody else pays more.

Second issue is that it is convenient to compare tracker people who bought at boom prices and SVR people who bought at half the price after 2010. But it is less convenient to compare tracker people who bought at boom prices and SVR people who bought at boom prices. I am that person. I know plenty of people in the same situation. Not sure why but I was not offered a tracker. Even better - i know someone who took 100% tracker mortgage, higher amount than I did, while I borrowed 75% LTV and on SVR, also in 2008. The result is that I lost all that money, and pay much more monthly than that irresponsible borrower on a tracker. No matter what people think about possible policy instruments to tackle high SVR, this is not right.

Bottom line: The banks do not "vary" their "variable rate" mortgages. I cant speak for other people, but it was my implicit understanding (and as explained by the bank officer at the time) that SVR is supposed to vary, up and down, depending on the costs of funds. If it does not vary over time with the costs of funds, then it is somehow arbitrary. Sure, it is "legal" but it is still a con.
 
If one group in society pays at the rate of 4-5% at the time when another pays 0.5-2%, and the assignment into groups was by a lottery for all intents and purposes, what do you do?

When I got my Irish mortgage in 2007, all banks except Danske Bank had branches in my town. I made a conscious effort to drive to the neighboring town to secure a tracker for myself as opposed to going to one of my local branches for a SVR or Fixed mortgage. I don't remember any lottery draws or flipping any coins to see which product I ended up with.

One of the most famous mortgage-related adverts of the time had a man stand up on a public bus stating "I don't even know what a tracker mortgage is". It's not as if the evidence wasn't out there that they should be researched.
 
Hi Visigoth

Firstly, thank you for your thoughtful response.

I certainly agree that whether trackers are loss-making or simply low-yielding is not important to the essential point that you are making that there was an almost random allocation of terms offered to borrowers between 2004 and 2008 and that randomness has had a profund impact on the well financial well-being of borrowers, which is essentially unfair.

By the second half of 2008 most, if not all, lenders had effectively stopped offering trackers. There was, however, a period between (roughly) the start of 2007 and the second half of 2008, when lenders were only offering trackers to borrowers that fitted within certain underwriting criteria and not more generally. I have no doubt that certain borrowers during this period fell either side of this devide for reasons that can not be explained objectively at this remove.

However, I don't think it would be fair to retrospectively penalise those borrowers that were fortunate (or clever) enough to secure a tracker during this period. I don't think anybody could realistically claim they didn't know what a tracker was by that point. With the benefit of hindsight, it obviously seems much more significant that a borrower was unable to negotiate a tracker rate during this period.

I don't have any personal, selfish interest in this issue but I do strongly believe that contracts should be upheld according to their terms. I know it sounds trite but we are all impacted by chance events and circumstances that subsequently turn out to be important. That, to my mind, is not a good reason to alter our freedom to enter into contracts with each other and to have those contracts upheld by law.

Having said all that, I can certainly understand why you feel hard done by.
 
Bottom line: The banks do not "vary" their "variable rate" mortgages. I cant speak for other people, but it was my implicit understanding (and as explained by the bank officer at the time) that SVR is supposed to vary, up and down, depending on the costs of funds. If it does not vary over time with the costs of funds, then it is somehow arbitrary. Sure, it is "legal" but it is still a con.

There is a lot in what you say.
 
I am sorry, V, that you bought at a high price and now feel that way being on SVR. How come a tracker was not available? Banks were quite late pulling trackers as a product and it was well after house prices were trending downwards. What Bank was it and when did you buy?

So many different things mentioned in various posts and red herrings (e.g. car insurance, credit card debt) that it is important to keep on post, however. Of course there is huge sympathy for people who are struggling, those on SVRs, etc. It is completely ridiculous that Banks can use the SVR rates in the way they are doing. Do you seriously think that, if theoretically Banks could increase tracker rates they would reduce SVR rates significantly? Or would they fleece the tracker holders also?

Can I ask a few questions please.

1 You bought your house in 2008 at (unfortunately for a lot of us) at high prices. What was your SVR rate at that time. ECB rates were 4.25% in mid 2008 so if you apply a bank margin say 1-1.5%, SVRs were probably in the range of 5.5-6%. Was your rate something like that? (house prices took a steep decline post mid 2008).

2 What is your current rate that you are paying, guessing its 4% plus or minus?

3 Have your financial circumstances significantly changed since then (e.g. job)?

4 Presumably when you bought the house you did your figures and ensured that you could pay your mortgage at that rate?

5 Did you/the Bank stress test your mortgage payments, should have been done at 2% so that would suggest to me that the numbers showed you could still afford your mortgage at say 7.5-8%, though probably with difficulty I suspect.

The above questions are largely rhetorical in nature, feel free to comment (I am simply seeking to help and put some things in context).

On the basis of what I see, unless your financial circumstances have changed and I know they have for a lot of people for which I have huge sympathy/empathy), you are now paying a few percentage points less in interest, made a decision at the time and signed a contract, but yet feel embittered re the tracker/SVR issue. Why is that? Your mortgage payments are cheaper today than when you bought the house, yet you feel 'hard done by'?

Do you seriously believe it was a lottery like process? Other posters have commented on that, suffice to say there was plenty of information and publicity on trackers and people were well informed. A lottery is a game of chance, with lucky outcomes for a few. Selecting between a tracker and SVR was nothing of the sort. While no doubt people on trackers are thankful, I believe most of them made a reasonably informed decision, no doubt influenced by Banks pushing the product as a means to increase lending. To describe the process as a lottery, well the mind, staggers. Its not as if one was buying a item of clothing, buying a house is the most important financial decision in most peoples lives.

Staying on the car analogy so, if I bought a car last week for 25 grand. This week you buy it for 20, identical car? How would you feel if 'forced' to pay me 2,500 simply because you bought it cheaper. Lottery, chance, good comparison? No. Simply the way of the world. Unfortunate and unfair that it may appear to you. Best wishes.
 
Last edited:
When I got my Irish mortgage in 2007, all banks except Danske Bank had branches in my town. I made a conscious effort to drive to the neighboring town to secure a tracker for myself as opposed to going to one of my local branches for a SVR or Fixed mortgage. I don't remember any lottery draws or flipping any coins to see which product I ended up with.

One of the most famous mortgage-related adverts of the time had a man stand up on a public bus stating "I don't even know what a tracker mortgage is". It's not as if the evidence wasn't out there that they should be researched.

Exactly Ronaldo, and around that period I got a mortgage but picked a fix and I was happy with that, I didn't choose a tracker but a sibling did. It was not a lottery, it was up to people to educate themselves. What's really striking about this debacle is how many people can not even lay their hands on their mortgage documentation. This for the single biggest debt commitment of their lives.
 
. If the banks charge mortgage-holders a higher interest because some customers default or do not pay or banks sustain other property-related losses, it means that mortgage market pools risks somehow, so even a good customer who never defaults pays more because some in that pool would default, correct? .

Just wish to point out that this has always been the case and will always be. The costs of bad debt/defaulters is built into the cost of the mortgages.
 
Just wish to point out that this has always been the case and will always be. The costs of bad debt/defaulters is built into the cost of the mortgages.

Agree with the principal as long as fairly and reasonably applied. I see a significant difference between defaults in a normal, functioning banking market, which should be at a low (and predictable) level, and those that arise in a dysfunctional market where Banks have in effect collapsed, where enormous sums of public money has been put in to rescue them, etc. In the case of the latter, it is very wrong in my view to overly burden SVR holders with these exceptional/extraordinary costs. It is very fair for SVR holders to complain and protest.

I disagree with the argument some SVR holders have to make tracker holders also pay higher rates, and that SVR holders are subsidising trackers, etc. Two wrongs don't make a right!
 
Thanks for the comments, guys.

I appreciate where you come from, but I hope you see my point also. I don’t know what is the right policy regarding the issue to tell you the truth. I like the idea about “contracts should be upheld according to their terms”, certainly. But it does not work out like this always, does it not?


When the state ran out of money to pay for high-salaried public sector workers with in-built salary increments and salaries in general higher than in private sector, a levy was introduced, followed by a freeze on increments. Surely, it violated their contracts that the employees expected to be upheld, but what else the state was supposed to do? It was the right decision because there was no money available, and they did not shift the burden to other societal groups only to upheld their precious contracts. Maybe it was not exactly like this but this is my understanding. Now, imagine a hypothetical situation where all Irish mortgages were, or changed into, trackers. With an “emergency” ECB rate around 0% for years now, and high funding costs for the Irish banks until recently, all Irish mortgages would have been either loss making or breaking even at best. Do you seriously think contracts would have still been upheld according to their terms regardless of the facts on the ground? Of course not. There would have been no money to upheld contracts. What if 75% of mortgages were trackers, would it still be right to make 25% pay for the defaulters and for the banks for make some kind of profit? Is 50%-50% right? What is the ratio that makes it right?


Ronaldo and Gerard123 took an issue with my lottery analogy. Of course I did not imply that it was an actual lottery, I meant it more in an economics textbook kind, as a quasi-random allocation. Plenty of people may have been on fixed terms while trackers were offered and maybe they did not want to pay penalties for breaking, dunno. Some people may have been saving responsibly for the down payment in 2004-7 like I did. Certainly, if there is evidence that people on tracker mortgages are different, i.e., more likely to have two persons working, have permanent and more stable incomes, better credit, etc, etc – than other mortgage groups, then that allocation is not random. Then if one fulfills the criteria that Ronaldo and Gerard123 fulfilled then one can join this wonderful group and live happily thereafter. I also hope the responsible tracker mortgage holders equally paid 25% in their own money for their homes like I did and did not get 100% mortgages. But the allocation was quasi-random, i.e., had nothing to do with personal attributes.

And I would have no any issue whatsoever with someone buying a car for 20K and I buying it for 25K, or more likely 30K if we keep that tracker-SVR ratio analogy. But I would have an issue if a car dealer gave you a contract to keep buying cars every 4 years from that dealer for 20K for life while that dealer's losses on the sale of your cars would have been financed by other people buying for 30K.

Still, having said all that, I don't like the idea of tracker holders paying more in principle. I would like the banks to reflect their true funding costs in SVR pricing, or keep offering trackers if you fulfill certain criteria, i.e., non-random.
 
As for Gerald123 questions, not sure to tell you the truth. Basically, in 2003-8 my wife and worked, worked, did not go on holidays, did not spend, saved money. In early 2008 we were approved for a tracker mortgage by the BOI. It took some time to find a house, so in the middle 2008 that initially offered mortgage somehow became SVR instead of a tracker. I had a feeling something was not right in the property market but my wife was pregnant at the time and wanted to avoid a hassle of house hunting with a small baby later. And yes, the mortgage payments were a bit higher at the time maybe 5.25 than they are at 4.5% at the moment. But I knew that in 2008 rates were so high because they tried to take the heat off the market, and they could only go down later. I didn't work for the bank to know better so I also assumed the banks were regulated, it was not Argentina, right? But the main thing that tipped the decision was the verbal assurances by the bank persons that SVR and trackers always co-varied and the difference was purely legalistic. I did not have any reasons not to trust them. Rates go up and down. I expected to overpay my payments when the rates are low, like they are in the last 4 years, and just keep paying what was due when they are high. And if my SVR reflected the bank's funding costs and went down from 4.5% to say 2.5-3% now, I could have reduced the principal amount somewhat and been in a position to switch and participate in a wonderful market completion that sorts out all your troubles. But contrary to all expectations, the SVR turned into something else entirely – fixed at an arbitrary rate - and I feel like a slave.


I am willing to bet the BOI did not stress test my mortgage, they either did not care or maybe thought even if I fail, the property would still be worth 75% LTV so the sucker would lose his money and they would not. Now I am quite savvy about credit, tricks and banks, but in 2008, if you never borrowed from a bank, even if you are an educated and responsible person, it was not all that clear. But now it is too late.

So, to all you responsible tracker holders, don't think there are no people out there who were responsible borrowers, who saved, did not take 100% mortgages, who have good jobs, and who still lost everything and got screwed by the banks. It is not like "even though we pay little on trackers while we bought at boom prices - and others pay a lot on SVR because they bought at half that price after 2009, so it is fair". It is a little messier.
 
To be honest, your issue seems to be unfortunate timing, rather than a random allocation of a particular mortgage product.

By the second half of 2008 most, if not all, lenders had completely withdrawn their tracker mortgage offerings. Frankly, it sounds like you missed the boat.

In many ways, the second half of 2008 turned out to be the worst possible time to enter the property market. Trackers were no longer generally available and while property prices had fallen back somewhat from peak by H2 2008, we now know that they had a lot further to fall.

It is important to emphasise that this is all with the benefit of hindsight. It would have been very difficult in H2 2008 to predict the sheer scale of subsequent property price drops or the fact that the ECB would reduce their base rate to almost zero.

I can certainly understand why you would feel upset at the randomness of it all. Given your timing, you should still be availing of mortgage interest relief, which should be at least of some assistance.
 
Sure, bad timing, just my luck. But I know quite a few people in a similar situation, I don't think I am that abnormal. You see, I am basically risk-averse, I did not do anything crazy, you know, I did not buy stocks with uncertain returns, or had deposits in Icelandic banks. You start a family, expect a baby, it is very natural to buy a house when you start a family or expect a baby, not when the timing is right, it is not an “investment”, it is just a family house, especially in light of the abysmal renting market in Dublin back in 2008. And you save for a down payment and go to a reputable bank, you expect that they know what they are doing, right? Should I have done my homework better? Absolutely. Should the BOI have “frozen” or “reviewed” their mortgage offerings in mid 2008 when they knew of the scale of difficulties – absolutely. But they did not care. In retrospect, I would have been better off going on holiday every year and buying a superduper Porsche instead of that down payment, at least I would have had something tangible left. And I find it increasingly difficult to care about meeting monthly payments to the BOI that did not care about my money, and now treats new customers way better than the existing ones.

Anyway, forget my ranting here. Back to the original thread is what to do for the “variable” in SVR to begin “varying”. Switching is a market-friendly option. But in order to switch you need to have a better LTV. In order to reduce LTV, you need to overpay. But you cannot overpay when your SVR is at 4.5%. You could have if the SVR were 2.5-3% or so. And it is not.

And nobody so far gave good reasons why only SVR customers are supposed to cover bank losses and contribute to their profits, and how to change the situation. Short of changing the government next year, there are not that many options left. Maybe they should increase TRS ad hoc for people like me then, i.e, bought at boom and have non-tracker. But why should taxpayer pay for it, that would be wrong. But then again why should SVR carry the burden of covering for the high rate of defaults in the irish market? Surely, the easiest solution for all is somehow to make SVR "track" the observable funding costs, or convert all into much lower fixed rates than the ones they are offering at the moment. But they are not pressed by either the govt or the competition to do so.
 
. But I knew that in 2008 rates were so high because they tried to take the heat off the market, and they could only go down later. .

.

No way can you stand over that statement. Nobody can predict rates and over the years on here we've had many posters asking us what way they will go, but it's always a guess. You have to weigh up your options at the time you take out the loan and plan based on that. As you bought in 2008 well after the bust I see no issue, your'e actually paying less now than you did.

As for treating the mortgage payments in a cavalier fashion now, that's not very mature. If you are struggling, and I don't know anybody who starts a mortgage that doesn't have to struggle and give up holidays or going out, if it's continuing then I suggest you do the money makeover thread for more individually tailored advice.

Are you not happy with the house you bought and the one that is your home, in which you've already made 7 years of repayments on.
 
Maybe they should increase TRS ad hoc for people like me then, i.e, bought at boom and have non-tracker.

Well, the rate of mortgage interest relief for first time buyers was increased in 2012 to 30% until 2017 for borrowers who took out their first mortgage between the years 2004 to 2008. In other words, the taxpayer is already paying you a subsidy in recognition of the fact that you had the misfortune of buying at a time of elevated property prices and the fact that you are paying a higher interest rate than a borrower with a tracker would presumably mean that you are receiving more relief.

Also, it's not the case that variable rate mortgage borrowers are unique in bearing the cost of the high level of non-performing loans on our banks' balance sheets. Deposit rates, current account charges, personal and business loan rates have also been adversely impacted.
 
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.
 
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.

TRS is 30% until 2017 for a first time buyer that acquired their PPR in 2008; it's only 15% until 2017 for a non-first time buyer but I understood (possibly mistakenly) from your post that you didn't fall into this category. In either case, the TRS ceiling is doubled for a married borrower.

Prior to the 2012 changes, TRS would have expired after 7 years so you are still getting a relatively material amount of additional relief.

I am inclined to agree that we probably would all have been better off if we had started to phase out mortgage interest relief much earlier (it's not available for mortgages written after 2012 and will be phased out completely by the end of 2017). Nigel Lawson started to reduce mortgage relief in the UK as far back as 1988 and Gordon Brown abolished it completely in 2000.
 
Sarenco, you are right on TRS, but it is not the % but the ceiling that matters. I am married first time buyer, mortgage taken in 2008:
First 7 years 30% up to 20K ceiling - making it effectively 30% on interest, and from this year and to 2017 it is still 30% but up to 6K only, so effectively it is less than 15%, it is under 110 euro or so. I would have preferred if my SVR reflected their funding costs a little bit, say SVR of 3% instead of current 4.5%, would have saved way more than 100 quid, without taxpayer involved. I would have probably overpaid the difference, would have been in a lower LTV bracket for the miraculous third-party entry in the mortgage market in the future, and would have moved on.

But nobody has good answers as to why "variable" as in "SVR" does not vary at all for so long. For me this is what bugs me and what the thread is all about, did not really intend to rant about my experience or the BOI again.
 
Ah, yes, although the rate of relief remains at 30%, in your case the ceiling of relievable interest payments drops from €20k to €6k for 2015, '16 and '17.

Even so, a TSR payment of around €150 per month is not to be sniffed at - assuming you are a higher rate tax payer, it equates to additional (gross) income of around €3,500 per annum. You are entitled to this relief for a year longer than somebody that bought in 2009, two years longer than somebody that bought in 2010, etc. Bear in mind that previously relief would only have been available for 7 years. I'm not suggesting for a moment that this puts you in a better net position than somebody that bought in those later years - but it helps.

As regards your final point, I'm afraid your mortgage rate did vary - it just wasn't varied in the way that you may have hoped. Unfortunately, any assumptions you may have made regarding the possible direction of any rate variation or any expectations you may have had in this regard simply wasn't reflected in your loan agreement and, ultimately, that's what really matters.

The Government can (somewhat crudely) ameliorate the effect of all this through granting or extending mortgage relief but that's about all they can do under the current legislative framework.

I personally have considerable sympathy for borrowers that are not in a position to switch mortgage providers to improve their position due to negative equity, etc, and I have repeatedly suggested here that a statutory cap on variable rates should be introduced as a percentage (I have suggested 125%) of average new lending rates to protect these borrowers. However, I have to concede that this suggestion has gained very little support here or elsewhere.
 
Thank you for your thoughts and comments, Sarenco, appreciate it. What is done is done, and while nothing would change my “love” of the BOI casino-like bank, it is probably counterproductive to keep reconstructing the causes and effects of this and that. And if a levy on trackers, or unloading them to some ECB vehicle to be taken care of – to relief the current extraction from the SVR – is not desirable, what do we the svr customers are supposed to do?

Sure, here are the written terms of the SVR contract that are quite different from the verbal assurances by the bank officers as to what they entail. In fact, there appears “at discretion” in that SVR contract that seems like an economic slavery if you interpret it verbatim. It probably means that customers can be charged any rate the bank deems it is able to extract from them. what a customer in a market economy does when she is not happy with the business? – of course she seeks another provider. I would love to move on and get a better contract elsewhere. But there is no competition as there are so few of them they resemble a cartel almost. And since LTV targets are not based on prices at the time of purchase but on elusive contemporaneous price changes over time – it is like running after horizon to meet them. So say there is a grexit, another slump, prices drop again by 20%, here go the new LTV targets for you, wait another 10 years.

The idea of a 125% over average cap is probably good unless the banks, because there are so few of them, can collectively raise their rates to get a higher average. If you had 20, they would not be able to coordinate, but with 3-4, no problem. But there has to be some regulation to give more certainty. I wrote to 3 local TDs about the issue and received polite PFO letters in essence. I have a bad feeling about Noonan’s “review” in September.
 
Back
Top