"Simplistic demands for banks to slash their rates are just early election stunts"

Brendan Burgess

Brendan Burgess

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From Martina Devlin in today's Indo

Simplistic demands for banks to slash their rates are just early election stunts

However, it's not as simple as villainous banks versus hapless homeowners, as Fianna Fáil is eager to suggest in early electioneering rhetoric. And is it really appropriate for the Government to wade in, even though it owns PTSB, AIB and 14pc of Bank of Ireland? Intervention would be popular, but not necessarily right.

Certainly, those 300,000 mortgage holders paying over the odds are in an unenviable position. But what's in their best interests is diametrically opposed to the best interests of citizens as a whole. It will benefit the Irish people if every Irish bank became profitable again - that represents our best chance of payback on the bailout. In addition, profitable banks are better insulated against another downturn.
 
It's Martina's view that is too simplistic but at least its an attempt by the Indo to appear balanced on the subject. There are lots of ways for Bank's to make profits. The SVR is an easy option to take money from a vulnerable group.

If the bank's were really still a concern, it would make more sense to introduce legislation to scrap all trackers and set a base rate for every mortgage in Ireland until the banks are profitable. Never going to happen.
 
I think Devlin's article is very balanced and fair. She makes some excellent points. In addition we heard from the meeting yesterday that cost of funds at around 1.5% is not the full picture.
 
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  1. So profit is justified on the back of indecent immoral trading ??????? On that basis the government could yield tax from drug dealing ......very profitable business earned from exploitation of the vulnerable few.
 
But there is a further element to bear in mind. Standard variable borrowers are more likely to have bought post-peak: it was no longer possible to get a tracker mortgage after early 2009. Which means they paid post-boom property prices. By comparison, tracker-holders probably bought during the runaway years. Which means they paid more and may now be in negative equity. Perhaps that relatively affordable tracker loan is all that enables the borrower to meet repayments.

Is there any figures available to back up what she is saying here that SVR borrowers are more likely to have bought post peak. From memory I thought the last few years was dominated by cash buyers so not that many of the 300,000 would have been since 2009
 
Bronte said:
I think Devlin's article is very balanced and fair. She makes some excellent points. In addition we heard from the meeting yesterday that cost of finds at around 1.5% is not the full picture.
Click to expand...

Hi Bronte

Would you mind summarising what additional information was provided yesterday regarding PTSB's costs for those of us who were not able to attend?
 
jathclare said:
If the bank's were really still a concern, it would make more sense to introduce legislation to scrap all trackers and set a base rate for every mortgage in Ireland until the banks are profitable. Never going to happen.
Click to expand...

You right, thats never going to happen. Bu people keep talking about it as though it's some way possible!
 
Have read martina's article. It's interesting when considering macro economic policy of an entire country . However when I signed up to my mortgage contract, nowhere did I read that such macro economic policies would be a factor in whether my mortgage rate would rise or fall.

Does Martina really expect 300000 people to take a hit to ensure banks are attractive purchase proposals for a foreign bank?
She says:
"Certainly, those 300,000 mortgage holders paying over the odds are in an unenviable position. But what's in their best interests is diametrically opposed to the best interests of citizens as a whole. It will benefit the Irish people if every Irish bank became profitable again - that represents our best chance of payback on the bailout. In addition, profitable banks are better insulated against another downturn."

With all due respect, there's no mention of " the best interests of citizens as a whole" in my mortgage contract. Judge hogan in Millar says a contract must be fair.
I love the way lofty language is used to justify screwing ordinary mortgage holders while propping up the sacred right of banks to make vast profits.
Reminiscent of 2007 no?....
 
Brendan Burgess said:
From Martina Devlin in today's Indo

Simplistic demands for banks to slash their rates are just early election stunts

However, it's not as simple as villainous banks versus hapless homeowners, as Fianna Fáil is eager to suggest in early electioneering rhetoric. And is it really appropriate for the Government to wade in, even though it owns PTSB, AIB and 14pc of Bank of Ireland? Intervention would be popular, but not necessarily right.

Certainly, those 300,000 mortgage holders paying over the odds are in an unenviable position. But what's in their best interests is diametrically opposed to the best interests of citizens as a whole. It will benefit the Irish people if every Irish bank became profitable again - that represents our best chance of payback on the bailout. In addition, profitable banks are better insulated against another downturn.
Click to expand...

What would benefit the Irish people more is people spending less of their money on SVR mortgages and more on Irish goods and services. Its the multiplier effect you see. The last time I checked consumption expenditure was a rather large component of Aggregate Demand. Don't think we would be needing QE if ECB base rates and SVR'S hadn't decoupled several years ago !
 
The ECB cut rates in order to stimulate economic recovery.
By not passing on rate cuts, the banks are preventing 300,000 mortgage holders from benefiting from this measure.
Brian Hayes MEP says we need a European solution to this & he may be right.
When the ECB cut the rates did they envisage banks NOT passing on these rates to customers? I think not.
 
Sarenco said:
Hi Bronte

Would you mind summarising what additional information was provided yesterday regarding PTSB's costs for those of us who were not able to attend?
Click to expand...

Risk
And I think capital - it meant cost of doing business

I did not attend, heard Burgess take issue with the risk part, he said they had already paid for this, or already had it budgeted for, but BB will have to confirm, bank didn't come back clearly on this as far as I could tell. I need to listen to it properly so sorry for not being 100%
 
Thanks Bronte. Do you know if there is a recording of the full proceedings that is publicly available?
 
Sarenco said:
Thanks Bronte. Do you know if there is a recording of the full proceedings that is publicly available?
Click to expand...
I'm on my tablet and have no clue about podcasts, my husband gets these things for me. Rte I think.

Anybody know why the heads of PTSB all seemed to be British? No problem with that obviously but just curious.
 
Bronte said:
Anybody know why the heads of PTSB all seemed to be British? No problem with that obviously but just curious.
Click to expand...

Hi Bronte

After the financial crisis, all the lenders recruited chairmen and chief executives who had no involvement with the collapse of the banks. (I think that Richie Boucher is the only one who survived).

Brendan
 
Bad news for SVR mortgage rate holder, because reading between the lines below, banks have to increase their margins not decrease them.

http://www.independent.ie/business/...lan-for-bailedout-permanent-tsb-31130483.html

But specific committemts, including to increase lending margins and potentially to sell some tracker loans, are likely to be controversial.

So all the talk of marches, or of Noonan and of the Central Bank are not going to change anything. What's worse is that Noonan and the CB know this.
 
Good news for taxpayers.

PTSB is on track and will start repaying the government. This means they don't need any more state funding. State funding costs us in our pockets. Which is why taxes had to rise. So if PTSB who are unprofitable, did reduce mortgage rates, then the money 'certain' borrowers would gain would hit everybody else.

From the article:

Around €400m of that money is earmarked to be returned to taxpayers in a first repayment of part of the bank's €2.7bn bailout.

According to the European Commission, the restructuring plan set out the path for PTSB can see bank can return to viability without further State support, while ensuring it - and its owners - contribute to the cost of restructuring without distortions competition in the market. Permanent TSB is the last of Ireland's bailed-out banks to win EU approval for its restructuring plan.
While the plans are drawn up by banks' managers it is the Department of Finance, on behalf of the State, that actually seeks approval.
 
Bad news for distressed borrowers with PTSB

Under the approved terms PTSB must sell its .... UK..... and €1.67bn of distressed Irish property loans.

(Note I corrected the word disress to distressed, it's a typo in the Independant)

Whoever buys those loans are going to want to get money back. So strategic defaulters watch out. They are coming for you.
 
Trackers in particular to be sold off - and confirmation that trackers are losing money for the PTSB. (and presumably the other banks)

http://www.independent.ie/business/...-to-sell-its-highrisk-mortgages-31131015.html

An Irish bank has been told to reduce the number of its tracker mortgages in arrears, including by selling off the high-risk home loans.

Bailed out lender Permanent TSB (PTSB) was ordered to reduce its book of tracker mortgages in arrears as a condition for European approval of a long-term rescue plan.
The bank is losing money on the trackers, loans where interest charges have automatically followed the ECB rate to an all time low.
 
Anybody able to explain to me why banks ever thought it was a good idea to have trackers. I mean it's it the most stupidest thing a banker could have come up with.
 
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