# Defaulters "cost other mortgage holders €250 a month"



## Brendan Burgess (19 Dec 2018)

Not sure why I am putting that in quotes as it was I who said it. 


But good article in the Irish Times anyway.

*Defaulters ‘cost other mortgage holders €250 a month’*


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## RETIRED2017 (19 Dec 2018)

Should you not have said  lending practices by banks in the past cost  mortgage holders  250 euro a month

I know back around the time most of these Defaulters  Mortgage were given out both my wife and myself were approved for loans totaling over 80000 euro in the post most of it was for home Improvement loans which we did not need or apply for,

Back around 1996 we moved into a new house and we took out a loan of 40000 euro, WE had no need to borrow or take out loans since then,

 We did not need or take the banks up on the offers I suspect a lot of the people taking up these offers are the defaulters of today,

 I also remember being in the banks taking money out of my account and being asked if I wanted a loan at the time I had money invested in a five year fixed account ,

I remember thinking  at the time They are being reckless with the money I have in deposit ,

 Most People already know reckless lending practices  has pushed up the rates on mortgages holders who did not fix when rates were low along with people who have or are about to take out new Mortgages,


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## Leo (19 Dec 2018)

RETIRED2017 said:


> Should you not have said lending practices by banks in the past cost mortgage holders 250 euro a month



Walk into a Mercedes or BMW garage, then or now, and they'll ask you if you want a new car, they'll even try and convince you you need or deserve one and work the numbers so you can 'afford' it. Most people are wise enough to realise they don't need the top of the range model, or can't afford it. But no one blames the car dealer for trying to sell the car, that's their business after all.

So you were wise enough to know you didn't need the money on offer, you can't blame the banks for giving people what they wanted. You remember all the talk here and elsewhere at the same time with some people complaining that the banks wouldn't give them even more?


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## odyssey06 (19 Dec 2018)

Leo said:


> Walk into a Mercedes or BMW garage, then or now, and they'll ask you if you want a new car, they'll even try and convince you you need or deserve one and work the numbers so you can 'afford' it. Most people are wise enough to realise they don't need the top of the range model, or can't afford it. But no one blames the car dealer for trying to sell the car, that's their business after all.
> 
> So you were wise enough to know you didn't need the money on offer, you can't blame the banks for giving people what they wanted. You remember all the talk here and elsewhere at the same time with some people complaining that the banks wouldn't give them even more?



I thought one of the skills of banking and giving out loans is knowing who can or can't pay back... Bankers seem to have lost this ability entirely.

If the car dealership was giving out finance to people who had very little chance of paying it back, but very great ability to damage \ put the car out of their reach \ significantly reduce value  of the car, then they'd be culpable in thier own costs & possible downfall.

So its the *default *not just the defaulters that produced the cost.


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## The Horseman (19 Dec 2018)

odyssey06 said:


> I thought one of the skills of banking and giving out loans is knowing who can or can't pay back... Bankers seem to have lost this ability entirely.
> 
> If the car dealership was giving out finance to people who had very little chance of paying it back, but very great ability to damage \ put the car out of their reach \ significantly reduce value  of the car, then they'd be culpable in thier own costs & possible downfall.
> 
> So its the *default *not just the defaulters that produced the cost.



The dealership could recover the car and sell it on to minimize its loss. Try doing that on a property in Ireland.


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## odyssey06 (19 Dec 2018)

The Horseman said:


> The dealership could recover the car and sell it on to minimize its loss. Try doing that on a property in Ireland.



I wasn't trying to minimize the difficulties in Ireland of recovering the debt from the property. We've seen the nonsense in Roscommon from a total chancer who should have been turfed out long ago.

Just I'd still expect a car dealership to take a hit on their bad loans for cars that are no longer in the state or were driven into the ground. If it was one careful owner of fixed abode then the dealership would be ok 

Even when the banks got their hands on investment and commercial properties they did not cover the loan amount. Sime still dont even after years of growth.


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## Leo (19 Dec 2018)

odyssey06 said:


> I thought one of the skills of banking and giving out loans is knowing who can or can't pay back... Bankers seem to have lost this ability entirely.



Bank staff, like the car dealers and most others involved in sales roles, were solely incentivised on sales, no consideration was ever made the long term success of the transaction. 



odyssey06 said:


> If the car dealership was giving out finance to people who had very little chance of paying it back, but very great ability to damage \ put the car out of their reach \ significantly reduce value  of the car, then they'd be culpable in thier own costs & possible downfall.



The dealer faces no costs when someone fails to uphold their commitment. There will be some costs for the finance provider, but cars are very easy and inexpensive to reposes, and any shortfall can be sold on to debt collection agencies. As with mortgages, those costs are reflected in the interest rates offered and borne by all consumers.


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## RETIRED2017 (19 Dec 2018)

Leo said:


> Walk into a Mercedes or BMW garage, then or now, and they'll ask you if you want a new car, they'll even try and convince you you need or deserve one and work the numbers so you can 'afford' it. Most people are wise enough to realise they don't need the top of the range model, or can't afford it. But no one blames the car dealer for trying to sell the car, that's their business after all.
> 
> So you were wise enough to know you didn't need the money on offer, you can't blame the banks for giving people what they wanted. You remember all the talk here and elsewhere at the same time with some people complaining that the banks wouldn't give them even more?


The easiest way to get a loan for a top of the range Mercedes was to take out a Mortgage back then ,
Have you forgotten seeing people moving into new houses and having a new car or two parked in the driveway at the same time all thrown in along with the mortgage,


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## Leo (19 Dec 2018)

RETIRED2017 said:


> The easiest way to get a loan for a top of the range Mercedes was to take out a Mortgage back then ,
> Have you forgotten seeing people moving into new houses and having a new car or two parked in the driveway at the same time all thrown in along with the mortgage,



They were throwing car loans at anyone who wanted them too, even with significant portions of previous loans outstanding. Anyone spreading car repayments over 20+ years really shouldn't be allowed outside on their own....


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## odyssey06 (19 Dec 2018)

Leo said:


> They were throwing car loans at anyone who wanted them too, even with significant portions of previous loans outstanding. Anyone spreading car repayments over 20+ years really shouldn't be allowed outside on their own....



Thats the equivalent of the 100% mortgage...


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## SPC100 (19 Dec 2018)

Brendan, thank you for continuing to try and get this message across in the media.

Unless our citizens and politicians understand that eviction is necessary for a healthy credit environment, evictions will remain a taboo, and people can continue to take advantage of the rest of us.

I think your proposal of 'fast eviction' only for the people that do not engage or strategic defaulters is a very good starting point, and one that is hard to argue with.

The problem is that the media, and others dumb it down to, 'Evictions are bad', 'The Irish should never ever be evicted again'.

FWIW, I have seen a tide of understanding growing over the last year or two, where online threads about evictions have more voices (than they did in the past), pointing out that eviction should be done in cases where people are playing games, or not engaging, and that evictions are required for a functioning banking system, and that in Ireland eviction only happens after a long long time and many chances etc.,

Have we reached a solution for unsustainable mortgages, (i.e. the borrower can't afford to re-pay, and can't afford to rent in the area) but where the borrower continues to engage in good faith and is making regular payments. I think these are the more difficult cases, especially if young children or old people are involved.


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## RETIRED2017 (19 Dec 2018)

Leo said:


> They were throwing car loans at anyone who wanted them too, even with significant portions of previous loans outstanding. Anyone spreading car repayments over 20+ years really shouldn't be allowed outside on their own....


 They can be allowed outside on there qwn but should not be allowed to mix with reckless Bankers who loaned them the money they are now defaulting on, The don't have to pay back the reckless loans over 20% years The 250 euro a month put on new and where possible  existing Mortgages will cover the cost of reckless lending ,


Going off reports from people who attend Court and the advice given They will be sitting pretty inside there homes once they can show they are making an effort to pay what the can including repayments on there present car ,

There appears to be no problem getting  a car and offsetting the cost once they can show they have a reason for needing one before making repayments on there reckless Mortgage ,


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## qwerty5 (20 Dec 2018)

Its an uphill battle. Look at the recent eviction in Strokestown. I read that the bank had initiated proceedings in 2009. 9 years later and the house is still in the possession of the guys not paying for it and certain TDs are on their side  How much do these cases cost and why can we not sort this out in Ireland?


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## gnf_ireland (20 Dec 2018)

qwerty5 said:


> Look at the recent eviction in Strokestown.


I have to admit I look in despair on those events. However, it does highlight the need for a more sensible approach to business lending in particular - especially when it comes to farm lending. I will add that I am from a farming background, although now based in Dublin. 

I think at this stage, there needs to be clear separation between a business asset (e.g. agricultural land) and the private residence. If someone wants to borrow money for business purposes, they should be forced to split the house from the farm with different folio numbers, and the business asset only should be used as the security against the loan. This should apply for any business loan/business asset relationship.

It should also mean that the only loans secured against PPR's are the purchase of that PPR. So if the loan does bad, it should be possible to secure the loan against the other assets easier and without the toxicity of evictions. But the downside would be the bank have less security on the loan and therefore may not be willing to borrow less or at a higher interest rate. 

It may also be necessary for banks to put a cap on the lending for agricultural purposes to x times their annual grant payments (aligning to affordability) 

Evictions should then only happen due to PPR in serious arrears or the person goes bankrupt.


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## Mrs Vimes (20 Dec 2018)

What you're essentially suggesting is that all lending except for ppr mortgage lending would be non-recourse.

Under the current situation regardless of what asset a loan is secured on any assets owned by the borrower can conceivably be in play where default occurs. It is unlikely that a judge will grant an order to repossess a ppr on a loan which wasn't even secured on it initally, but not unheard of.

https://www.irishtimes.com/news/guarantor-of-friend-s-loan-loses-her-home-1.1254149


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## RichInSpirit (20 Dec 2018)

My totally monthly mortgage interest is much less than €250


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## gnf_ireland (20 Dec 2018)

Mrs Vimes said:


> What you're essentially suggesting is that all lending except for ppr mortgage lending would be non-recourse.


I am not sure if that comment was directed towards what I said, but I am guessing it was.
I am not suggesting this. I am saying that the banks would not be able to accept a PPR as security against a business loan. They would have to either accept other assets as security (e.g. farmland) or they will have to treat it as an unsecured loan with an associated higher interest rate.
At the moment, it is exceptionally difficult to enforce the security anyway, so why not just call a spade a spade and exclude it from the equation. That way banks and the borrowers understand up front what the security is actually based on.



Mrs Vimes said:


> Under the current situation regardless of what asset a loan is secured on any assets owned by the borrower can conceivably be in play where default occurs. It is unlikely that a judge will grant an order to repossess a ppr on a loan which wasn't even secured on it initally, but not unheard of.
> https://www.irishtimes.com/news/guarantor-of-friend-s-loan-loses-her-home-1.1254149


Again, this is an extremely rare scenario, and I do feel sorry for that woman. However, under my suggestion she would not have given a guarantee on her PPR. If she had no other assets, or no other significant income, the guarantee would be worth very little and the bank would have to determine if it was sufficient to issue the loan.

Let's say Joe has a equity portfolio worth 200k and a PPR worth 800k. He applies for a loan for his business and the bank seeks some security. I am proposing that only the 200k portfolio can be used as a security, and not the PPR. If the bank are not happy with this cover, they can decide not to issue the loan etc or charge a higher interest rate due to the associated risk.


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## RedOnion (20 Dec 2018)

@gnf_ireland it's either with recourse or it isn't. Currently, even without the PPR being put up as security, the bank could get a judgement charged against the PPR on default of a full recourse loan.
If you remove recourse, business lending would all but stop (except for areas like asset finance).


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## gnf_ireland (20 Dec 2018)

RedOnion said:


> it's either with recourse or it isn't. Currently, even without the PPR being put up as security, the bank could get a judgement charged against the PPR on default of a full recourse loan.
> If you remove recourse, business lending would all but stop (except for areas like asset finance).


But why does it have to be binary - why can it not be secured on specific assets (or asset classes only) and exclude other asset classes.  Why can the bank not get a judgement on all assets except PPR? I accept this is not what is done today, but who says that what is done today is the right way of doing things. Its not like its terribly successful in a lot of cases.

I fully accept that if PPR was to be removed as security, the amount of lending would potentially drop and the interest rate be higher to offset the associated risk. BUT if the bank struggle to enforce the security on the PPR, what is it worth anyway.

Take the Strokestown incident - its not like the house was worth a massive amount of money, the asset value was in the land. That farce had been going on for a decade.


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## qwerty5 (21 Dec 2018)

RichInSpirit said:


> My totally monthly mortgage interest is much less than €250


Congratulations. You know how averages work I presume ?


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## seamus m (22 Dec 2018)

It is very unfair to  say defaulters  are costing mortgage holders 250 euro a month. They might be costing the banks and their  bottom line  and the staff and their  bonus .


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## jpd (22 Dec 2018)

It is not unfair - it is exactly correct. The high level of mortgage default and inability to swiftly re-possess the property means that all mortgage have a higher interest than would otherwise be the case. 

It is a sort of social contract here in Ireland - we all pay more for our mortgage but if we stop paying, you can't throw us out. Luckily, most people don't stop paying unless they fall on hard times but some who can pay, have stopped and continue to have a roof over their head free gratis


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## NoRegretsCoyote (22 Dec 2018)

gnf_ireland said:


> I have to admit I look in despair on those events. However, it does highlight the need for a more sensible approach to business lending in particular - especially when it comes to farm lending. I will add that I am from a farming background, although now based in Dublin.
> 
> I think at this stage, there needs to be clear separation between a business asset (e.g. agricultural land) and the private residence. If someone wants to borrow money for business purposes, they should be forced to split the house from the farm with different folio numbers, and the business asset only should be used as the security against the loan. This should apply for any business loan/business asset relationship.



This is fine in principle but has some big upfront costs for farmers .

Farmland with a house in close proximity is not very good collateral. In many cases access to land would be near the PPR, farm buildings would be close to the PPR, you would have to put boundaries in place too. Things like water and power would be shared between the PPR and the farm operations. 

You would not find very many willing buyers in the event of repossession, never mind the difficulty of farming land with a deeply resentful neighbour nearby.


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## RETIRED2017 (22 Dec 2018)

NoRegretsCoyote said:


> This is fine in principle but has some big upfront costs for farmers .
> 
> Farmland with a house in close proximity is not very good collateral. In many cases access to land would be near the PPR, farm buildings would be close to the PPR, you would have to put boundaries in place too. Things like water and power would be shared between the PPR and the farm operations.
> 
> You would not find very many willing buyers in the event of repossession, never mind the difficulty of farming land with a deeply resentful neighbour nearby.


Why Banks lend such huge amounts of money to people when the know the collateral is not very good known  people can devalue the asset to the level the can pay back ,
I suspect nothing is going to change seeing the can offset loans the should not have giving out in the first place onto responsible borrowers in higher interest rates,

Back in 1996 one side of where I built my house one was sold for  68000 pounds it is one 14 houses off houses in a row ,
The same people still own that house to this day

At the height of the boom one of the other houses was sold for 300000 euro
I was surprised to find out the house sold for 68000 pounds had a mortgage of 420000 on it
I was not surprised to find out the were Defaulting on there loan,

 Four new houses were built just before the down turn up the road from where we both live the were on the market at 450000 euro it turns out this was the valuation used to remortgage,

Turns out the were remortgaging there home as its value went up for lifestyle purposes ,
We should not be surprised at defaulters not paying back there loans seen they were given out on the value of there home rather than an ability to pay back loan,


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## NoRegretsCoyote (22 Dec 2018)

Outstanding credit to the entire agriculture sector fell from €4.3bn at end-2010 to just over €3.0bn at end-16.

It has crept back up to €3.3bn in the meantime.

Interest rates charged are consistently the highest for lending to SMEs by sector. Presumably this reflects the riskiness of the lending.


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## RETIRED2017 (22 Dec 2018)

NoRegretsCoyote said:


> Outstanding credit to the entire agriculture sector fell from €4.3bn at end-2010 to just over €3.0bn at end-16.
> 
> It has crept back up to €3.3bn in the meantime.
> 
> Interest rates charged are consistently the highest for lending to SMEs by sector. Presumably this reflects the riskiness of the lending.


Do you know if any of the 4.3bn got written off between 2110 and 2016,
I know of very large write down between 2011 and 2017 and the people who got the write down now own the same assets now worth  a lot more than the write down on the loans,


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## RETIRED2017 (22 Dec 2018)

NoRegretsCoyote said:


> Outstanding credit to the entire agriculture sector fell from €4.3bn at end-2010 to just over €3.0bn at end-16.
> 
> It has crept back up to €3.3bn in the meantime.
> 
> Interest rates charged are consistently the highest for lending to SMEs by sector. Presumably this reflects the riskiness of the lending.


I agree with you on Interest rates are consistently the highest for lending to SMEs by sector , We are seeing the same thing happening in the house mortgage market in Ireland most of it can be traced back to our Education system which has resulted in the people at the top of the banking system in Ireland during the boom resisting change expecting things to work out without changing course,
To be fair the central bank are trying to change how Banks lend which will lower rates long term ,


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## NoRegretsCoyote (22 Dec 2018)

RETIRED2017 said:


> Do you know if any of the 4.3bn got written off between 2110 and 2016,



I presume so. The Central Bank numbers only provide stocks and flows of lending, not write-offs or loans being paid off.


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## gnf_ireland (30 Dec 2018)

NoRegretsCoyote said:


> This is fine in principle but has some big upfront costs for farmers .
> 
> Farmland with a house in close proximity is not very good collateral. In many cases access to land would be near the PPR, farm buildings would be close to the PPR, you would have to put boundaries in place too. Things like water and power would be shared between the PPR and the farm operations.
> 
> You would not find very many willing buyers in the event of repossession, never mind the difficulty of farming land with a deeply resentful neighbour nearby.


Its fine to say that, but then you are stating that a very valuable asset cannot be used as collateral at all - so the farmer will need to either come up with a large deposit elsewhere or pay the cost of unsecured debt.

I am not disagreeing with you that it would not be difficult, but the reality is that if banks are going to continue to lend to farmers at reasonable rates, something has to be done to avoid the issues like what happened in Roscommon (obviously paying back the money borrowed is the easiest example). The immediately toxic issue is the eviction from the house, which to be fair is probably not worth that much. Remove that, and it becomes a different matter.

And there are plenty of people to purchase land in the country - repossessed or not. There are no shortage of farmers willing to purchase land another farmer has been renting for years. There is nothing like the opportunity of cheap land to cast aside any local allegiances !

But taking a step back - either the farm is a business asset or a personal asset. You can argue that if you cannot secure debt on a personal asset, then it cannot be used as collateral - and the farmer should pay the price - which they are by the statements around the highest interest rates per sector. They cannot have it every way !


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## NoRegretsCoyote (1 Jan 2019)

gnf_ireland said:


> Its fine to say that, but then you are stating that a very valuable asset cannot be used as collateral at all - so the farmer will need to either come up with a large deposit elsewhere or pay the cost of unsecured debt.
> ........
> But taking a step back - either the farm is a business asset or a personal asset. You can argue that if you cannot secure debt on a personal asset, then it cannot be used as collateral - and the farmer should pay the price - which they are by the statements around the highest interest rates per sector. They cannot have it every way !



Many a farmer could take steps to separate their PPR from their farmland and buildings:

Separate folios on the land registry
Clear boundaries between PPR and farmland with fencing and gates
Separate electricity and water connections
No shared entrances
Some or all of these would help to convince a bank that farm and personal assets were separate and would allow banks to lend on the farm assets only.

The problem is that this kind of separation costs money up front, and probably on an ongoing basis too! Blurring of the lines between business and personal activity is also quite beneficial for other reasons too.

Farming in Ireland is in many cases a part-time, hobby activity, and this is exactly the way many farmers want to keep it


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## cremeegg (1 Jan 2019)

Mods, is there any chance this thread could be split into the original "Defaulters "cost other mortgage holders €250 a month" and a farm collateral thread.


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## gnf_ireland (16 Jan 2019)

Sorry only seeing this now for some reason !! 

First, I am not talking about <50k loans here, I am talking about the large ones that end up with repossession orders being served.



NoRegretsCoyote said:


> The problem is that this kind of separation costs money up front, and probably on an ongoing basis too! Blurring of the lines between business and personal activity is also quite beneficial for other reasons too.


Yes I agree with you - on the condition that the farm and PPR have been in their ownership for years or have been inherited via the family/others. There are also the scenarios where farmers are using large loans to purchase new land, which is already on different folio numbers with fully separated utilities.

I think you have to also look at the reasons why the bank would give a farmer a loan of say 400k. The only two reasons I can think of are
(a) to buy more land to expand the farm or
(b) to dramatically modernise the farm to change the way production is done. I see this really only in the area of dairy - or maybe to establish a new line of business such as a piggery. How much does a new milking parlour cost these days ? ~100K (I have no idea other than my father in law recently put one up)?

Either way, it makes sense to separate business and personal interests in these cases, and not an unreasonable request from the bank in my view.




NoRegretsCoyote said:


> Farming in Ireland is in many cases a part-time, hobby activity, and this is exactly the way many farmers want to keep it



Why any bank would consider giving a large loan to a hobby farmer is beyond me, unless their real occupation gave plenty of security to pay back the money - e.g. a vet !!


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## RETIRED2017 (16 Jan 2019)

Leo said:


> They were throwing car loans at anyone who wanted them too, even with significant portions of previous loans outstanding. Anyone spreading car repayments over 20+ years really shouldn't be allowed outside on their own....


We are paying for the people in Banks who gave the loans to people who  shouldn't be let out on there own knowing well there was a very good chance of loan default,

We are well on our way of repeating the mistakes of the past by the look of things,


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## Leo (16 Jan 2019)

RETIRED2017 said:


> We are paying for the people in Banks who gave the loans to people who shouldn't be let out on there own knowing well there was a very good chance of loan default,



No, we're not. The vast majority of those loans have been or are being repaid. We're paying for the bank customers who, for a multitude of reasons, have failed to keep up with the repayments they committed to making, and the associated costs to the banks of chasing repossessions in some of those cases.


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## RETIRED2017 (16 Jan 2019)

Leo said:


> No, we're not. The vast majority of those loans have been or are being repaid. We're paying for the bank customers who, for a multitude of reasons, have failed to keep up with the repayments they committed to making, and the associated costs to the banks of chasing repossessions in some of those cases.


I don't believe over my life time people who take out loans have changed or are more likely to default, what has changed over my lifetime is  Banks now give out loans without checking to see what the loans are really being used for and can the people pay them back

If you have being following Askaboutmoney over the last week you will see loans being given out/offered 3 to 4 times what people applied for ,

Taking a view they should not have taken easy  loans being offered  is fine once you don't mind high default  rates and banks loading cost onto the people who make there repayments,


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## Leo (17 Jan 2019)

RETIRED2017 said:


> I don't believe over my life time people who take out loans have changed or are more likely to default, what has changed over my lifetime is  Banks now give out loans without checking to see what the loans are really being used for and can the people pay them back



There's evidence of a significant increase in strategic default as it has become more clear that there is very little repercussions for falling behind on home loans. Go along to the repossession courts and see for yourself. There is not the same level of default for motor loans where repossession of the asset is easy and cheap. Even before I had my first job banks were trying to sell me loans and credit facilities, that was well before the tiger and credit was easy come by, so it's not like the banks just swung the doors open for a few years.



RETIRED2017 said:


> If you have being following Askaboutmoney over the last week you will see loans being given out/offered 3 to 4 times what people applied for ,



Those were credit limits, not secured loans, a very different animal, and again, it's nothing new. Within ~3 months of getting my first credit card, my bank contacted me with the great news that my fine history of meeting the monthly repayments meant they were upping my credit limit. I was a little surprised they gave me a limit that was more than my net annual salary at the time, and that was the '90s. Around the same time I needed a car to get to work, needed finance and the bank strongly encouraged me to buy a brand new one with a loan multiples what I was looking for.


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## RedOnion (17 Jan 2019)

Leo said:


> Within ~3 months of getting my first credit card, my bank contacted me with the great news that my fine history of meeting the monthly repayments meant they were upping my credit limit.


Luckily CBI have restricted this practice a lot through CPC. Working in banking, I'm skeptical about people saying they were approved for higher credit limits than they applied for. Especially without their agreement prior to approval.


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## NoRegretsCoyote (17 Jan 2019)

I applied for unsecured personal loans from AIB in 2006 and 2015. High four figures over a year. On both occasions I was moving house&job and had cash flow issues.

On both occasions I was approved within a few hours over the internet - but at a rate approaching 10%!

AIB didn't want to know what the loans were for of whether I had other borrowings or commitments. Preumably all they checked was how much funds were going into my account and an ICB credit check.

From what I can tell Irish banks are comfortable with a high-margin, high-default business model.

Good customers aren't well served by this approach.


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