# FF Bill to tackle mortgage rates to be debated on Tuesday and Wednesday night



## Brendan Burgess (16 May 2016)

Great news. 

The bill on giving the Central Bank power to control mortgage rates will be the first bill to test how the new Dáil situation works in practice. 

FF has allocated its private member's time on Tuesday and Wednesday night to the bill.

I don't fully understand the stages, but they have managed to skip the first stage of moving the bill. So there will be a full debate tomorrow and Wednesday. 

Over the summer there will be consultations and the bill will be amended and passed when the Dáil resumes in September.  I have suggested amending it to make sure that any incentives given to new customers cannot be clawed back if the borrower switches.

The government's response tomorrow will be interesting.  There is no point in them voting against the bill as the majority of the Dáil will vote in its favour. 

I imagine that the Central Bank will try its best to scupper the bill. Of course, if the banks reduced their rates to Eurozone levels, the Bill would not be necessary.

Brendan


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## gnf_ireland (16 May 2016)

@Brendan Burgess  Thanks for letting us all know

Is it worth everyone emailing their TD's asking for support for this bill ? Even if competition comes into the market, it will not help those who cannot switch. This bill will be worth-while, even if it only helps those who cannot switch

Interesting move re proposing the "no claw-back" on incentives - this dramatically reduces the attractiveness of these from a bank point of view as they cannot lock you in. Any chance they will now only offer these for those who go onto 3-5 year fixed rates, therefore encouraging people to go onto fixed rates?
That said, if they remove them for SVR, it means they would have to play on a level field in this area !


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## Brendan Burgess (16 May 2016)

TDs would welcome some ideas for their speech on the issue.  I doubt if any of them will oppose the bill. 

If I were a TD I would be making a speech about the way competition will not help borrowers who are captive to their lender, and therefore this bill is necessary. 

Brendan


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## 44brendan (16 May 2016)

gnf_ireland said:


> That said, if they remove them for SVR, it means they would have to play on a level field in this area !


Why not remove them completely? They are an irrelevancy to what is a long term financial product! Changing ones mortgage provider is not done on a whim! It is an expensive and time consuming process and it is highly unlikely that anyone will do this to benefit from an opening offer. Virtually any margin differential between providers will provide far more benefit over the longer term than an opening cash-back offer!!


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## gnf_ireland (16 May 2016)

@44brendan  But removing them means they would have to lower their SVR rate - this appears to be something they are seriously reluctant to do currently !


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## deltrotter (16 May 2016)

Thank you Brendan for the update on this. Like you say good news. Lets hope we see some action on this soon.


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## newirishman (16 May 2016)

Looking forward to see how the bill is going to be phrased, from a legal / technical point of view.

As for those "cash back" incentives - they seriously should be outright banned. For most people it is just an incentive to take on more debt, and blow it on "stuff", which they then pay back over the lifetime of the mortgage.


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## Brendan Burgess (17 May 2016)

We have issued this press release just now 


The Fair Mortgage Rates Campaign welcomes the Central Bank (Variable Rate Mortgages) Bill 2016 and encourages all TDs to support it in the Dáil vote tomorrow night.

The Central Bank and the Department of Finance have long claimed that competition will solve the mortgage rates problem. This shows their complete failure to understand what is actually happening in the mortgage market. If a new lender were to enter the market tomorrow, they would target prime borrowers with loans of less than 80% Loan to Value. While this would help those who can switch lenders, it would be of no help to the 100,000 or so borrowers who can’t switch due to

·  having LTVs in excess of 80%

·  having rescheduled their mortgage in the past 5 years

·  having mortgage arrears in the last 5 years

·  no longer meeting the Loan to Income requirements due to a fall in income

The Central Bank claims to welcome competition but it has been dragging its heels over approving a new lender, Frank Mortgages, which would introduce real competition into the market. If the Central Bank genuinely welcomed competition, they would have pulled out all the stops and approved Frank Mortgages within a month of receiving the application.

There is a significant risk that *increased competition for the prime borrowers could actually result in higher rates for existing customers who can’t move* if these rates are not controlled.

While we welcome the bill, we believe that as currently worded, *it places too much reliance on the Central Bank.* The Central Bank would have to conclude that a market failure exists before taking any action. The Central Bank cannot be trusted. It has consistently put the interests of the mortgage lenders above the interests of borrowers and has taken no action to prevent the lenders from fleecing customers.

The Fair Mortgage Rates Campaign would prefer *an absolute mortgage rate cap of 3% above the ECB rate* with lenders able to exceed this cap only if they could show a justification for it. This would ensure that the customers of vulture funds in particular, would be protected.

We would also like to see the bill amended to ensure *that banks are prohibited from clawing back any incentives given to attract new business*. At present, Bank of Ireland and permanent tsb give borrowers a 2% cash back but claw this back if the borrower switches lender within 5 years. This clawback acts as a disincentive to competition and should be prohibited.

The provision in the bill which obliges lenders to *offer existing customers the rates available to new customers *is to be particularly welcomed. It is outrageous that lenders reduce rates to attract new customers, while not reducing rates for existing customers. Fair treatment for all could be achieved by obliging all lenders to quote a Standard Variable Rate with a discount for lower LTVs. The lender would be free to vary the SVR in line with market conditions, but the discount agreed at the outset would not change over the life of the mortgage. This would ensure that all existing customers benefit from rate decreases.

*The banks have brought this legislation down on themselves through their own stubbornness. *This legislation should not have been necessary. The banks have had plenty of time to bring their mortgage rates down towards Eurozone levels but they have refused.

*Fairer and lower mortgage rates will improve affordability, reduce arrears and boost spending in the economy generally. It’s time to get on with it.*

*Brendan Burgess  *



*Summary of the Bill *


2) The Central Bank shall carry out an assessment of the market for home loans
4) If it comes to a conclusion that a market failure exists,
5) It can direct a lender or lenders to reduce its rate to a set figure or margin
7) Lenders must offer existing customers the rates available to new customers, other than one off payments for stamp duty and legal costs.

When setting the rate, the Central Bank may
a) set a specific rate
b) set a margin above cost of funds
c) set a margin above the ECB rate
d) set a rate not more than 1/3rd above the average variable mortgage rate

When determining whether a market failure exists, the Central Bank shall consider the following:

(a) the variable interest rates being charged by lenders; 

(b) the ease with which borrowers can switch their principal dwelling house mortgage loans between lenders or between products offered by the same lender;

(c) the extent to which borrowers are switching their principal dwelling house mortgage loans between lenders or between products offered by the same lender;

(d) the relationship and proportionality between the variable interest rates being charged by each lender and the cost of funds of that lender;

(e) the trend in variable interest rates being charged in the principal dwelling house mortgage loan market over time;

(f) lenders’ cost of funds and the trend in lenders’ cost of funds over time;

(g) lenders’ weighted average cost of capital and the trend in lenders’ weighted average costs of capital over time;

(h) the risk profiles of individual lenders in respect of variable interest rate principal dwelling house mortgage loans;

(i) lenders’ reasonable profit expectations in the prevailing market conditions;


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## Sarenco (17 May 2016)

Interestingly, RTE is now reflecting the view expressed by some posters that this proposed legislation could actually be counter-productive.
http://www.rte.ie/news/business/2016/0516/788839-blog-mortgage-rates/

Personally, I take the view that the proposed legislation is more likely to be completely ineffective in terms of achieving any of its stated aims, which is a pity because I am of the opinion that mortgage borrowers that are not in a position to switch providers are deserving of a degree of (effective) statutory protection.


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## Brendan Burgess (17 May 2016)

Michael Noonan is trying to delay the bill by proposing to refer it to pre-legislative scrutiny.  The bill can be passed tonight and the full scrutiny can be done of the provisions as they are being discussed. 

It is the exact same bill which was introduced last July and he raised none of these issues back then.

Brendan

*Press Statement by Minister for Finance Michael Noonan T.D. *

*On the subject of Excessive variable mortgage rates*



This Bill has been tabled by Fianna Fáil and proposes to give power to the Central Bank of Ireland to regulate interest rates. This Bill will be discussed in the Dáil tonight (Tuesday) with wrap up tomorrow (Wednesday).

I feel there are three major flaws in the Bill as presented.




Some of the provisions appear unconstitutional
With provisions like these the European Central Bank will need to be consulted before legislation could be enacted.
The Central Bank Governor (and his predecessor) has stated that they do not wish to regulate interest rates. As an independent body even if the Central Bank were given the power to regulate interest rates they could not be required to exercise this power. In addition competition is not a function of the Central Bank, it falls within the remit of the Competition and Consumer Protection Commission (CCPC).
For these reasons, and to assess other unintended consequences, I consider it essential that this Bill goes through pre-legislative scrutiny. After all, it was for such reason that the Programme for Government provides that this would be mandatory for new Bills.

I have received Government approval to propose to the Dáil that the Bill be sent for pre-legislative scrutiny rather than pass second stage. In the event that our reasoned amendment is not accepted by the Dáil, I proposed and it has been agreed that we should not oppose the passage of the Bill at Second Stage and let it go forward to Committee Stage. This approach is currently being examined with the Oireachtas Bills office.



The Government does of course share the principle of reducing standard variable rates.

Now that the banks are almost fully recovered they will be in a position to do more to help their customers.

It is widely agreed that competition is the best way to reduce rates and ensure that we have a sustainable and viable mortgage market and that the heavy hand of regulation may not be the best way to engender competition.

There are also some signals that new entrants are looking to enter the Irish market. This level of competition will put further downward pressure on interest rates.



The steps I have taken thus far have been very effective. Banks have reduced their variable and fixed rates. I would like to see the banks aiming to suit the different needs of different people.

The Government also encourages switching options between various institutions made easier for customers. In addition, the Central Bank supports the Department of Finance engaging with banks on their procedures to make it easier for customers to switch.


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## rodger (17 May 2016)

That's where Noonan is wrong.

He hasn't done enough.

He hasn't been effective.

Aib was the best. But Noonan had no influence over BOI.


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## Sarenco (17 May 2016)

So if the Government proposal to send the Bill for pre-legislative scrutiny is not accepted, the Government will not oppose the passage of the Bill at second stage, even though the Government (rightly or wrongly) believes the Bill is seriously flawed and raises constitutional issues.

We truly live in a very strange democracy.


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## Paul Reilly (17 May 2016)

Your doing Great work Brendan

My advice

No 1 ...New and Existing customers should lawfully be entitled to the same rates.

No 2 ....Negative equity does not mean you cannot switch if your property was ever in positive equity. The economy is not the customers fault

No 3... Universal 5 or 10 step simple straightforward switching process available to everyone

No 4.... Fixed Rates available to all borrowers 

No 5 ...... No two types of mortgages for the same amount of borrowings should differ in price by more than 1%

No 6..... Any mortgage that is over 4per cent incurs a levy for the bank that makes it much less or not profitable


Ive made up these ideas in 2 minutes so dont slay me. .theyr just ideas


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## Paul Reilly (17 May 2016)

Also anybody who voted a repeat of the same government knew what they were letting themselves in for. To get change vote change. The same will bring the same.


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## Brendan Burgess (17 May 2016)

Sarenco said:


> So if the Government proposal to send the Bill for pre-legislative scrutiny is not accepted, the Government will not oppose the passage of the Bill at second stage, even though the Government (rightly or wrongly) believes the Bill is seriously flawed and raises constitutional issues.
> 
> We truly live in a very strange democracy.



Hi Sarenco

They believe that only parts of the bill are flawed. They can propose amendments to fix the flaws.

There is no need to reject the entire bill and delay it even further. 

Brendan


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## Gushering (17 May 2016)

Will the Bill only apply to new mortgages issued after it is passed? Can it apply to pre-existing mortgages? Presume private property rights may have a role here?

Haven't really seen this angle addressed in debate yet.


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## Sarenco (17 May 2016)

Brendan Burgess said:


> There is no need to reject the entire bill and delay it even further.




Well I don't pretend to understand politics but it seems very odd to me that elected representatives would not oppose a Bill they believe is fundamentally flawed and/or unconstitutional.

Surely the Government objects to the primary purpose of the Bill, which is to give the Central Bank the power to fix mortgage rates in specified circumstances?  What aspects of the Bill does the Government  agree with?


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## Brendan Burgess (17 May 2016)

Ah, I see your point. 

If the government thinks that whole bill is flawed, then they should simply oppose it.  They don't want to do that as they probably don't want to be defeated on a substantial, rather than a procedural issue. 

It would be difficult for Shane Ross to vote against a bill which tries to reduce interest rates. Presumably he can vote in favour of this even if FG votes against it. 

Brendan


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## Sophrosyne (17 May 2016)

To be honest, this is probably all about politics and bluster.

Michael Noonan is correct in that competition it is not a function of the central bank, but consumer protection is.

Even if this Bill were to be passed, there is nothing in it to _compel_ the central bank to set mortgage interest rates, it is rather that it _may_ if it wishes, which of course it will not.

Other than giving false hopes to SVR mortgagors, this Bill will achieve nothing.


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## Brendan Burgess (17 May 2016)

Sophrosyne said:


> Other than giving false hopes to SVR mortgages, this Bill will achieve nothing.



Hi Sop

Even if the CB were to do nothing, the following clause would have an immediate and significant impact:

"7) Lenders must offer existing customers the rates available to new customers, other than one off payments for stamp duty and legal costs."

I would prefer to see a statutory ceiling on mortgage rates.  But I would settle for giving the CB the power to control rates. If they continue to promote banks ahead of consumers, then the legislation could be changed again.

If the CB has the power, it's likely that the lenders will reduce their rates to avoid forcing the CB to use its power.

Brendan


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## Sophrosyne (17 May 2016)

I don’t think it would have the desired effect.

Banks would probably think of more creative ways of incentivising new customers other than a reduction of interest rates.

The Dáil could, of course, threaten to take away the central bank’s customer protection function and give it to the CCPC.


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## Sarenco (17 May 2016)

Brendan Burgess said:


> If the CB has the power, it's likely that the lenders will reduce their rates to avoid forcing the CB to use its power.



Surely that will only be the case if the banks believe there is a credible threat that the Central Bank would ever actually exercise those powers? 

I strongly suspect that banks are well aware of the fact that there isn’t a snowball’s chance in hell that the ECB would ever permit the Central Bank to actually exercise any of these powers.  Bear in mind that the Central Bank cannot act unilaterally in these matters following the introduction of the single supervisory mechanism.

I’m not convinced about the wisdom of the provision of the Bill that prohibits discrimination between existing customers and new borrowers in setting a variable interest rate for a group, class or category of principal dwelling house mortgage loans. 


Firstly, such a provision would reduce the incentive for incumbent lenders to innovate and bring more competitive products to market.  This would have an adverse impact on competition and would ultimately be expected to result in higher rates overall.
Secondly, it would reduce the ability of incumbent lenders to react positively to more competitive products introduced by new entrants.  Again, this would have a negative impact on competition within the mortgage market.
Thirdly, it could be easily circumvented by lenders competing on matters other than rates and it is of no assistance whatsoever to borrowers where the lender is not actually trying to compete for new customers (the Danske/debt fund scenario).

To my mind this legislation is more about political manoeuvring than actually trying to protect the position of borrowers that are not in a position to refinance their loans.


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## SS expert (17 May 2016)

Brendan Burgess said:


> "7) Lenders must offer existing customers the rates available to new customers, other than one off payments for stamp duty and legal costs."



Will this really make that much of a difference? for KBC - yes, but for the rest?
Ulster Bank you can move to whatever product you meet the requirements for
AIB/EBS?
BOI?

Also, just thinking - If the banks are forced to reduce rates 
Surely the banks will make less money. Then the future rate cuts  (if any) wont come as quick...?


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## Brendan Burgess (17 May 2016)

"A Government spokesperson said today it will try to move a reasoned amendment to this bill in the Dáil.

...

They said there may be constitutional issues with the Fianna Fáil approach and the matter of variable interest rates is area for the Competition Authority and not the Central Bank."

And this is what the Competition Commission said: 
*Competition Commission rejects investigation of mortgage rates*

"
_The concerns you raise regarding the current state of the banking sector in Ireland and the nature of competition between banks are well known to the Commission. However, I believe that a further study would not be useful at the present time as it would not resolve the issues inherent in the sector. Furthermore, I believe that the Commission's resources would be more appropriately utilised in other areas where our work could achieve meaningful change. I would point out however that the Commission continues to be active in the sector."_

Irish mortgage holders are being overcharged by around €1billion a year and the Commission thinks that it's not important enough for them. 

But when it's put to the Oireachtas to give the Central Bank control in the area, the Minister for Finance says it's none of their business. 

Brendan


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## Brendan Burgess (17 May 2016)

SS expert said:


> Will this really make that much of a difference? for KBC - yes, but for the rest?



Bank of Ireland does not allow people move variable rates. They keep their variable and fixed rates artificially high for existing customers by giving 2% cash back to new customers. 

permanent tsb does pass on cuts to existing customers, but again keep their existing rates artificially high with the 2% trick.

Brendan


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## tonymac (17 May 2016)

Brendan Burgess said:


> Bank of Ireland does not allow people move variable rates. They keep their variable and fixed rates artificially high for existing customers by giving 2% cash back to new customers.
> 
> permanent tsb does pass on cuts to existing customers, but again keep their existing rates artificially high with the 2% trick.
> 
> Brendan


Hi Brendan, unfortunately I couldn't make it in there tonight and I just wanted to wish this the best of luck. I do hope that the bill has some piece in it that ensures that Philip Lane or whoever is supposed to help ordinary consumers is made do their job, the one they don't want and that it continues to be enforced into the future.


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## Paul Reilly (17 May 2016)

I was foolish to think that this Bill would make any difference.

Mortgage Rates will only change if banks voluntarily reduce them like AIB did. 

Or if mortgage relief is given to everyone.

This bill will take at least 2 years to be approved with this shower.

I give up. Im going into my own provider and AIB and going to try everything to switch including getting a solicitors letter.

The government are unwilling and powerless to fix this and im sick of waiting.


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## inaquandert (17 May 2016)

I hope something comes of this.   At the very least it should be easier and less costly to switch banks


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## Brendan Burgess (17 May 2016)

Does anyone know what actually happened? 

Did FG manage to kick the Bill to touch? 

Brendan


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## noproblem (17 May 2016)

Brendan Burgess said:


> Does anyone know what actually happened?
> 
> Did FG manage to kick the Bill to touch?
> 
> Brendan


For whatever reason Michael Noonan doesn't want this bill to pass, he may not get his wish though. Below is what FG want, but may not get.

"A Government spokesperson said today it will try to move a reasoned amendment to this bill in the Dáil.If this was successful it would take the bill off the floor of the Dáil and it would instead be considered under what is called pre-legislative scrutiny.The spokesperson said both Fianna Fáil and Fine Gael want the same outcome but they said Fine Gael also has to stand up for it believes to be the right thing".


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## Sophrosyne (17 May 2016)

Brendan Burgess said:


> Does anyone know what actually happened?
> 
> Did FG manage to kick the Bill to touch?
> 
> Brendan



The are 13 minutes left in the time slot for for non-group members and so the debate is to resume tomorrow at 7pm.


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## Brendan Burgess (18 May 2016)

An interesting comment from Ciarán Hancock in today's Irish Times 

*Issue of variable mortgage rates not going to go away*

"McGrath is open to the banks taking matters into their own hands by voluntarily lowering their rates. They might do well to bite this carrot before the politicians fashion a stick to beat them with."

This would be a good outcome. If the lenders rendered the legislation unnecessary by reducing their rates towards the Eurozone levels. 

"In private briefings the Central Bank has warned that there could be a number of unintended consequences from enacting this Bill into law, and has tried to explain the various legacy factors that feed into the pricing of variable rates by the five players left standing in the market."

I am really astonished how the media is actually paying any attention to the Central Bank's comments on mortgage rates. 

Honohan said that control of interest rates could be justified.

The Central Bank has been deliberately publishing misleading data to pretend that Irish mortgage rates are lower than they actually are. 

My views are hardening on this issue.  If the Central Bank is not going to get involved, then bring in a statutory cap of 3% above the ECB rate - no exceptions. 

Brendan


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## rodger (18 May 2016)

Noonan is showing his true colours, fighting against a just cut for 300,000 variable rate customers.

What does that say about other policies during the previous government?


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## Brendan Burgess (18 May 2016)

A powerful article by Charlie Weston in today's Indo 

*Variable rate bill is vital - despite Central Bank's discomfort*

A great summary of the arguments 

"But it is a problem of the Central Bank's own making. It has consistently failed to do anything about interest rate gouging by the banks. The issue affects 300,000 mortgage holders on variable rates.

Up until recently, the Central Bank was producing figures on mortgage rates that understated the extent of the rip-off, until this was exposed by consumer advocate Brendan Burgess and the Irish Independent.

Variable rates here are twice what they are across the Eurozone, something that has been consistently highlighted by this newspaper.
...

None of this is comfortable for the Central Bank. It does not want to be able to regulate mortgage rates, and is unlikely to use such powers if it gets them.

However, it is hard to have sympathy for the Central Bank - as it has consistently put the interests of banks ahead of those of consumers on the variable rate issue. If it is feeling the heat on the topic now, hard luck."


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## PadKiss (18 May 2016)

*OPPORTUNITY MISSED* 
Hi all I wanted to comment on this important issue for affected customers. There is currently (and has been since May 2009) an opportunity for borrowers to 
de-leverage the levels of debt with the current low ECB and lending rates (in other countries) but the opportunity for Ireland will not last forever. 

It seems totally unfair that these very lenders can be afforded time to get their books in order but to do it to the detriment of their customers is totally wrong. Our government can today borrow at approx 0.8% for 10 years and yet the customers of our lenders are paying 4% or greater for SVR's. Investors with Rentals interest rates can be in excess of 6% and commercial loans are in excess of 7% in some cases. 

Added to this is the frustration of 15 year fixed rates in Europe at approx 2.15% and Tracker loans being available in the UK. 

And Minister Noonan's reply is that competition will correct matters!!!!!!!!!!!!!! 

This avoids the fundamental question of _"What happens when EBC rates turn"_ the opportunity to lower the levels of debt for people in this country will be lost and this unique opportunity will have been missed. More importantly the opportunity to lower debt levels in Ireland will have been used, incorrectly in my view, only to restore profit levels to our lenders. 

Well done Brendan and I will be there tonight to lend support to this important issue. It is not simply a request to reduce interest rates, the bigger picture needs to be looked at here and the opportunity cannot continue to be missed.

A more forward thinking approach with the customers in mind which will better the economy on a wider scale with reduced debt levels should be the desire of all
Padraic


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## Sarenco (18 May 2016)

Brendan Burgess said:


> None of this is comfortable for the Central Bank. It does not want to be able to regulate mortgage rates, and is unlikely to use such powers if it gets them.



And yet this ineffective legislation is somehow "vital"?  The logic escapes me.

I really wish the Indo would stop repeating the myth that variable rates in Ireland are twice the Euro Zone average - this is simply untrue. 

The average (median) rate on all outstanding variable rate mortgages in Ireland is almost exactly the same as the average rate on all outstanding variable rate mortgages across the Euro Zone.


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## Brendan Burgess (18 May 2016)

The stockbrokers are lobbying hard against it: 

*Davy: five reasons why mortgage Bill will not work *


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## Brendan Burgess (18 May 2016)

Sarenco said:


> I really wish the Indo would stop repeating the myth that variable rates in Ireland are twice the Euro Zone average - this is simply untrue.



It's unlike you to make such a claim without clarifying what you mean. 

The new business rate in Ireland is 3.7%  compared to 2% across the Eurozone. You know that is true. 

The gap is coming down so it's no longer twice, but it is still substantially ahead. 

Brendan


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## gnf_ireland (18 May 2016)

Brendan Burgess said:


> However, it is hard to have sympathy for the Central Bank - as it has consistently put the interests of banks ahead of those of consumers on the variable rate issue. If it is feeling the heat on the topic now, hard luck."



I guess this sums up the situation nicely - the banks and central bank have backed themselves into a corner. They have two options - fight it to the bitter end or avoid the situation by agreeing to drop the interest rates across the road

It is worth noting that the share price of BoI has dropped approximately 15% in the last 3 weeks (27.1c to 23.2c). If the market is acting on this like Minister Noonan claims, then they are factoring in a reduction in profits either way.


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## gnf_ireland (18 May 2016)

Sarenco said:


> The average (median) rate on all outstanding variable rate mortgages in Ireland is almost exactly the same as the average rate on all outstanding variable rate mortgages across the Euro Zone.



Yes, I don't think anyone is disagreeing with this point. Statistics can be used to say anything. That said, statistically, averages & medians should also be used in conjunction with Standard Deviation, which of course would give a very different story.

However the point is the new business rates are close to double the eurozone average- which I assume we all accept.


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## demoivre (18 May 2016)

Sarenco said:


> The average (median) rate on all outstanding variable rate mortgages in Ireland is almost exactly the same as the average rate on all outstanding variable rate mortgages across the Euro Zone.



Is that true for the most typical variable interest rate charged in Ireland and the EU?


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## gnf_ireland (18 May 2016)

demoivre said:


> Is that true for the most typical variable interest rate charged in Ireland and the EU?



I believe so, if you include the low cost trackers from the Celtic Tiger years. I don't believe @Sarenco would have any reason to lie on this discussion (even if our views differ on some things)

So 1 person on 1%, 1 person on 5% and 1 person on 3% - median & average = 3%. However to new business the 1% and 3% options not available - only the 5% one !
Statistics can prove anything !


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## demoivre (18 May 2016)

gnf_ireland said:


> I believe so, if you include the low cost trackers from the Celtic Tiger years. I don't believe @Sarenco would have any reason to lie on this discussion (even if our views differ on some things)
> 
> So 1 person on 1%, 1 person on 5% and 1 person on 3% - median & average = 3%. However to new business the 1% and 3% options not available - only the 5% one !
> Statistics can prove anything !



I know that and as there are five measures of average I was curious as to what the modal value was for variable interest rates in Ireland and the EU.


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## gnf_ireland (18 May 2016)

demoivre said:


> there are five measures of average


Mean, Median, Mode, Mid-Range - which one am I missing

No idea of whether the 'mode' is available


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## rodger (18 May 2016)

So what we're saying is the high variable rates are subsidising the trackers

And that's fine

Average is correct

What's the problem?


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## gnf_ireland (18 May 2016)

rodger said:


> So what we're saying is the high variable rates are subsidising the trackers


I don't think anyone is saying that SVR's are subsidising trackers. At least not currently (maybe in the past). Brendan has a post here to say that the cost of funds with PTSB is 0.55% - doubt there are many trackers at that level around



rodger said:


> Average is correct


Any 'Average' figure should be used with deviation from it. This shows a very simplistic view of any situation.



rodger said:


> What's the problem?


I assume this piece is satirical


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## Sarenco (18 May 2016)

Brendan Burgess said:


> It's unlike you to make such a claim without clarifying what you mean.



Not sure what you mean Brendan, I thought I was pretty clear what I meant in the following sentence:-



Sarenco said:


> The average (median) rate on all outstanding variable rate mortgages in Ireland is almost exactly the same as the average rate on all outstanding variable rate mortgages across the Euro Zone.



It is obviously the case that variable rates on new loans are higher here than in the rest of the Euro Zone.  It is also equally true that the reverse was the case a number of years ago.  The average of all outstanding variable rates includes both sub-sets of home loans.


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## Sarenco (18 May 2016)

demoivre said:


> I know that and as there are five measures of average I was curious as to what the modal value was for variable interest rates in Ireland and the EU.





Sarenco said:


> The average *(median)* rate on all outstanding variable rate mortgages in Ireland is almost exactly the same as the average rate on all outstanding variable rate mortgages across the Euro Zone.











The median figure certainly includes trackers - practically all variable rate home loans written on the continent are actually trackers (typically a margin over 6 or 12-month EURIBOR).

For reference, the average effective rate on all outstanding variable rate loans in France (as calculated and published by the French Central Bank) over the last quarter is 2.66%.  I suspect that is slightly higher than the equivalent figure in Ireland, bearing in mind that more than half of all outstanding Irish variable rate mortgages (including trackers) are currently at a rate of less than 1.25%.


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## Sophrosyne (18 May 2016)

I watched the debate on Oireachtas.ie.

Michael Noonan proposed that the Bill be delayed for 6 months in order for it to be scrutinized by a select committee to examine and address:

·  the major constitutional issues raised by the Bill,

·  the obligation to consult with the ECB on legislation of this nature,

·  the CB’s stated position on this issue,

·  the importance of competition as a sustainable and long-term solution to this issue and

·  the possibility that this Bill may have unintended consequences.


Pearse Doherty disagreed with the 6-month delay and while he accepted that the Bill was flawed he felt that whatever was wrong could be amended at committee stage.

I thought that Catherine Martin, Green Party, made some excellent points.

She said;

“I commend the efforts of Deputy McGrath who has been a constant voice in this area and I agree with him that banks will not act voluntarily and must be forced.

Where I take issue however, is with the current Bill before the House.

It is drafted with such infirmities that it could never, in its current state, hope to see the light of day. It will not pass the test of constitutionality and would inevitably be struck down.

The bank knows this, the civil servants know this, the government knows this, so lets not give them all an _I told you so_ moment in the sun.

Yes there is a process at committee stage where Bills can be amended, but this Bill cannot be amended for it is inherently and fundamentally flawed.”

She proposed that the Bill, in its current state, be withdrawn and represented as soon as possible once it is capable of passing the basic test of constitutionality.

Her full speech is worth hearing.

First part – at 57:38 minutes on this link:



Remainder of speech at this link:


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## rodger (18 May 2016)

Sarenco said:


> The median figure certainly includes trackers - practically all variable rate home loans written on the continent are actually trackers (typically a margin over 6 or 12-month EURIBOR).
> 
> For reference, the average effective rate on all outstanding variable rate loans in France (as calculated and published by the French Central Bank) over the last quarter is 2.66%.  I suspect that is slightly higher than the equivalent figure in Ireland, bearing in mind that more than half of all outstanding Irish variable rate mortgages (including trackers) are currently at a rate of less than 1.25%.



Let's try to compare like with like

First off Irish trackers are not relevant to the discussion


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## Sarenco (18 May 2016)

rodger said:


> First off Irish trackers are not relevant to the discussion



Ok, then presumably trackers written elsewhere in the Euro Zone are equally irrelevant to this discussion so can we please stop making inaccurate comparisons?

Average variable rates in Ireland are not double average variable rates elsewhere in the Euro Zone - that's the only point I'm trying to make.


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## gnf_ireland (18 May 2016)

Sarenco said:


> practically all variable rate home loans written on the continent are actually trackers (typically a margin over 6 or 12-month EURIBOR).


I think the key point on the whole discussion is listed in the above line... 

On the continent, the vast majority of variable rate home loans are tracked against EURIBOR. This means that if I go to 3 banks tomorrow, and get mortgages offers off them, the best one will remain the best one for the duration of the mortgage. The customer can compare them, and are making decisions on LONG TERM comparisons.

The customer's on the continent are not left at the mercy of any given institution, or left vulnerable if the mortgage is sold on. The variable home loan is variable against something outside an individual banks control. 

We need to return to variable home loans tracking SOMETHING meaningful, or cap the movement of the variable home loan within an agreed margin of tolerance. 


Pure SVR's in Ireland are simply contracts in favour of the bank and 'abusive' towards the customer. Any commercial agreement should work for both parties and one party should never have a completely dominant position

PS: I do know people will say that no one is forcing anyone to talk out a mortgage they don't agree with, but the reality is society today needs a functioning banking sector!


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## Sarenco (18 May 2016)

gnf_ireland said:


> We need to return to variable home loans tracking SOMETHING meaningful, or cap the movement of the variable home loan within an agreed margin of tolerance.



Or alternatively borrowers could opt for fixed-rate home loans, which they are doing in increasing numbers.


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## gnf_ireland (18 May 2016)

Sarenco said:


> Or alternatively borrowers could opt for fixed-rate home loans, which they are doing in increasing numbers.



Fixed rate home loans do not suit everyone - myself for example who is trying to clear down the mortgage as quickly as possible. However, this is not about me personally  

I would be in favour of at least the option of longer term fixed rate home loans - so 15 or 20 years in duration. This is something which is also common on the continent also, but I understand more relevant at lower LTV's. This would obviously remove the need for stress testing a mortgage application, and would provide long term certainty into the repayments.

One possibility might be to support a 'break' clause every 5 years or so, where the mortgage could be paid back in full with no penalties (effectively allowing the mortgage holder to switch). This would hopefully average out any major fluctuations in interest rates over the lifetime of a mortgage.

I do wonder, given the fuss made around the Central Bank deposit rules, whether Irish people who also be so willing of the LTV rules on the continent, which I understand to be much tougher in general !


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## bdecuc (18 May 2016)

Great to see the bill pass second stage. Well done Brendan and all. And fair play to Michael McGrath for keeping with this. 

Hopefully there's proper engagement from all sides in committee stage to make the bill an effective tool to help fix the mortgage market. I'm sick to the teeth of paying 4.3% and more to PTSB. Unjustifiable gouging.


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## Clonback (18 May 2016)

Brendan 
Your perseverance and consistency has got a just reward tonight.
Well done.


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## inaquandert (18 May 2016)

I hope no one ever trusts a bank to do anything voluntarily. Shame on Michael Noonan and fg for not doing somrthingbabout this sooner.  Well done Brendan.    Well done ff.    I look forward to the day when my SVR is reasonable


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## Sarenco (18 May 2016)

Yes, congratulations to all who supported the Bill.

I'm curious whether anybody (other than Michael McGrath) actually spoke in favour of the Bill during the debate.  I haven't listened to all the contributions to the debate as yet but everybody I have listened to so far either said the Bill was "flawed" or "fatally flawed".  And yet it passed to the next stage.

Am I alone in thinking that the much vaunted "new politics" looks very much like business as usual?  

Surely we should be entitled to expect elected representatives to vote against proposals they disagree with and yet that doesn't seem to have happened on this first test of the new electoral dispensation. I really don't understand politics...


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## Sarenco (18 May 2016)

gnf_ireland said:


> I do wonder, given the fuss made around the Central Bank deposit rules, whether Irish people who also be so willing of the LTV rules on the continent, which I understand to be much tougher in general !



A number of UK mortgage lenders tried to launch long term fixed-rate mortgages a few year years ago but they were quickly discontinued due to a lack of interest.  The honest truth is that borrowers in this part of the world do not want to pay the premium associated with the security offered by term fixed-rate mortgages.


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## gnf_ireland (18 May 2016)

Sarenco said:


> The honest truth is that borrowers in this part of the world do not want to pay the premium associated with the security offered by term fixed-rate mortgages.



I guess it depends on the rate offered - a 20 year fixed mortgage at say 4% would probably be attractive to a lot of people. The same mortgage at 6% or 8% would not be as attractive.


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## Sarenco (18 May 2016)

gnf_ireland said:


> I guess it depends on the rate offered



As always.  There is always a cost associated with any reduction in risk.


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## gnf_ireland (18 May 2016)

inaquandert said:


> I hope no one ever trusts a bank to do anything voluntarily. Shame on Michael Noonan and fg for not doing somrthingbabout this sooner.



I think the various banks have shown their true colours over the last while. I honestly hope that we have learned enough lessons from the past decade not to be afraid to let 'corrupt' institutions fail. I don't believe anyone is 'too big' to fail.

On Monday night, I wrote to my 4 TD's in Dun Laoghaire (3 of which are FG). Not a single one acknowledged by email other than Mary Mitchell-O'Connor's assistant. I will defend her that she did actively engage me on this exact topic last March when the bill was originally submitted.  I think personally this is shameful, that the 'party' is still number 1, and any level of free thought is suppressed. Irish politics is really like the 'borg' mentality


While I have a level of reservations about this bill myself, mainly that the Central Bank will not use the power if given it, I do feel it is a major step forward. The amount of newspaper inches that this issue will get over the next few days will be massive. This can only be a good thing, even if you should only believe 50% of what you read !!!
Serious thanks to Brendan for his endless fight on this. His commitment over the last while cannot be underestimated. On behalf of all the SVR holders in Ireland, I personally thank you

Finally, I think Michael McGrath deserves a massive thanks also. He has been a champion on this for ages. I am sure it will result in a fair few votes for FF if there is another election any time soon !


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## Sarenco (18 May 2016)

Interesting debate on the Bill on RTE 1 radio at the moment for those that are interested...


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## gnf_ireland (18 May 2016)

Sarenco said:


> There is always a cost associated with any reduction in risk.



Will disagree with the always statement - and replace with should be 

My original SVR mortgage with BOI was on a standard rate with no allowance made for the fact the LTV was around the 65% mark at the time. If I had a 90% LTV which was permitted at the time, the rate would be the same even though the risk logically is much higher.
But we have already discussed the fact that we don't really do 'real' risk based assessments here in Ireland on a different thread.


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## Sarenco (18 May 2016)

gnf_ireland said:


> Will disagree with the always statement - and replace with should be



Point taken but if a particular risk isn't being borne by you it's being borne by somebody else in the system.  

If you are paying a higher rate than is appropriate for somebody with your risk profile then it follows that somebody else is paying a lower rate than is appropriate for their circumstances.  

Ultimately all borrowers (and, ultimately, taxpayers) collectively bear precisely the same risk.


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## bdecuc (18 May 2016)

Sarenco said:


> Yes, congratulations to all who supported the Bill.
> 
> I'm curious whether anybody (other than Michael McGrath) actually spoke in favour of the Bill during the debate.  I haven't listened to all the contributions to the debate as yet but everybody I have listened to so far either said the Bill was "flawed" or "fatally flawed".  And yet it passed to the next stage.


All FF speakers spoke in favour of it of course. It was accepted by almost everyone that any flaws could be investigated at committee stage. Most bills evolve while passing through the oireachtas. I think the test will be will Noonan and co work on it to improve it or will they continue to put up barriers.


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## Sarenco (18 May 2016)

Fair enough but can you really improve a proposal that you believe is fundamentally flawed?

I understood that the programme for government provided that all legislation would be subject to (all party) pre-vetting.  That didn't last long.


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## tonymac (18 May 2016)

I would also like to say I'm delighted that this has gone through and shame on FG and Michael Noonan for putting the banks first and getting their profits up at the expense of 300,000 SVR holders,  especially the captives. My one reservation is that the central bank will sit on the powers they've been given and don't want. I do hope that some sort of mechanism is built in at committee stage that ensures that the central bank is made do  it's job re consumer protection and puts manners on the banks if and when they step out of line without justifiable reasons. I'd also like to finally thank Brendan for his huge perseverance with this issue as well as Michael McGrath for his efforts on our behalf.  In fairness people give out a lot about politicians a lot of the time with justification but we must give him huge credit on this occasion. All we need now is to keep a watching brief as there's quite a number of people who will try everything to delay and frustrate this, eg frank money still not having its licence and thereby removing the lack of competition argument.


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## bdecuc (18 May 2016)

Sarenco said:


> Fair enough but can you really improve a proposal that you believe is fundamentally flawed?
> 
> I understood that the programme for government provided that all legislation would be subject to (all party) pre-vetting.  That didn't last long.


The pre-vetting thing just hasn't come in yet. Sure it's probably a good thing for bills but Noonan wanted to delay this bill for vetting for SIX months. Delays and barriers. There should be opportunity at committee stage to analyse and amend any legitimate concerns on the provisions. 

Is the bill fundamentally flawed? I don't know tbh. Something  has to be done though. I'd rather the legislature attempts to fix the situation rather than kow-towing to the central bank when the cb is only concerned with the profit margins of these companies rather than the citizens of the State.


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## Sophrosyne (18 May 2016)

bdecuc said:


> Is the bill fundamentally flawed? I don't know tbh. Something has to be done though. I'd rather the legislature attempts to fix the situation rather than kow-towing to the central bank when the cb seems only concerned with the profit margins of these companies rather than the citizens of the State.



bdecuc,

I see your point, but in this case, the bill is so flawed that it would really need to be completely re-drafted.
As I mentioned previously, Catherine Martin in particular, cited some of the many reasons why the Bill is unconstitutional.

I would rather see a Bill re-drafted than one that if enacted had no realistic chance of surviving a constitutionality challenge.


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## Paul Reilly (18 May 2016)

Cant believe Michael Noonan.

FG are only against this so they can be seen to be of a different view to FF. 

I dont think this Bill will come into force any time soon though so lets not go celebrating like wev won aka my beloved Liverpool in all their niavety.


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## Sarenco (18 May 2016)

bdecuc said:


> The pre-vetting thing just hasn't come in yet.



If it was part of the programme for government I would have assumed that it was applicable on formation of the government, no?

In my opinion the Bill, as currently drafted, in a wasted opportunity to provide a degree of protection to those borrowers who are not in a position to refinance their loans with other lenders.  That is not a minor complaint - it's a fundamental difference of opinion.  Tinkering at committee stage is just wasting time if you take the view that the Bill as currently drafted will be completely ineffective in achieving its stated objectives.

Far better to go back to the drawing board, in my opinion, to try and achieve a meaningful, effective legislative advancement.


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## bdecuc (18 May 2016)

I guess we'll have to see what the Attorney General's advice is. Catherine Martin spoke well but she may or may not be correct. Sure some crowd called Investec seem to have concerns and Noonan bizarrely cited them. When Investec take over from the AG's office well all be rightly screwed. 

I hope the bill can be analysed, amended if necessary and enacted.


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## Sarenco (19 May 2016)

Catherine Martin certainly spoke well but it's not clear to me what provision of our Constitution she (or anybody else) believes will be breached by the Bill if enacted.  

My problem with the Bill isn't based on a constitutional argument.  I simply don't believe the Bill will be effective in achieving it's stated aims and potentially could be counter-productive, resulting in higher overall mortgage rates in the medium term (by deterring potential new entrants to the market).  I obviously appreciate that is not a popular view around these parts.


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## Sophrosyne (19 May 2016)

I would have thought this was obvious.

How long would it be before interested parties mounted a constitutional challenge to legislation which conferred absolute power of interpretation of vague legislation to a regulatory body, where entities it regulates would have no right of appeal against its decisions?

However, I also don’t buy the competition mantra as the only solution.

How long do entrapped borrowers have to wait for competition?


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## Andy836 (19 May 2016)

Sarenco said:


> Catherine Martin certainly spoke well but it's not clear to me what provision of our Constitution she (or anybody else) believes will be breached by the Bill if enacted.
> 
> My problem with the Bill isn't based on a constitutional argument.  I simply don't believe the Bill will be effective in achieving it's stated aims and potentially could be counter-productive, resulting in higher overall mortgage rates in the medium term (by deterring potential new entrants to the market).  I obviously appreciate that is not a popular view around these parts.



Presumably articles 40.3.2 & 43.1 - Recognise the private property rights of individuals  (which includes corps) and assures individuals it will not pass laws that interfere with property rights. 

These were the same issues faced when the government sought to adjust upward only rent increases. 

There is a social justice caveat to these articles but a 5 year old could reasonably challenge that argument - why not interfere with tracker contracts? Why not allow banks foreclose on defaulted borrowers? The state/4.5mm citizens own these banks - why prioritize these 300k mortgages over the entire population?

The bill as presented is weak an ambiguous. It may help though - political/media pressure may force banks to move a bit more. I would say though that if this is the standard of draft legislation presented by public representatives (one of the largest parties too) then ireland is very poorly served. I'm sure ff and sf will get plenty of air time which is really the desired outcome.


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## Sarenco (19 May 2016)

Sophrosyne said:


> I would have thought this was obvious.



What do you think was so obvious?  Catherine Martin didn't mention any specific constitutional provisions so we can only speculate why she has taken the views that the Bill would be destined to be struck down on constitutional grounds.

I'm not saying she is wrong - I just don't think this aspect of her argument was particularly well developed (I appreciate that there are time constraints on speaking time so that's not really a criticism).



Sophrosyne said:


> How long do entrapped borrowers have to wait for competition?



I think this is the real missed opportunity of the Bill.  Borrowers that are not in a position to refinance their loans are not in a position to benefit from competition in the market and, in my opinion, are deserving of a degree of statutory protection.  I am of the view that we should adopt the French model (or a variant of this model) where rates are simply capped at a prescribed % over average rates (either of all outstanding loans or new lending rates).


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## Sarenco (19 May 2016)

Today's reactions from Governor Lane and Minister Noonan:-

http://www.irishtimes.com/business/...ge-controls-carry-competition-risks-1.2653645


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## Brendan Burgess (19 May 2016)

Prime Time will be discussing the legislation this evening. 

Brendan


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## Gordon Gekko (19 May 2016)

A pretty mundane discussion on Prime Time


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## demoivre (20 May 2016)

Sarenco said:


> I think this is the real missed opportunity of the Bill. Borrowers that are not in a position to refinance their loans are not in a position to benefit from competition in the market and, in my opinion, are deserving of a degree of statutory protection. I am of the view that we should adopt the French model (or a variant of this model) where rates are simply capped at a prescribed % over average rates (either of all outstanding loans or new lending rates).



I totally agree that this is the way to go. Any amount of competition in the market is never going to help those who cant switch lenders, and these borrowers need to be protected from being fleeced by lenders.


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## Gordon Gekko (21 May 2016)

Does the Bill allow the Central Bank to increase mortgage rates?

That's a power that could be used to influence the economy in a way that hasn't been possible since it was devolved to the EU.


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