# Deal includes: " A commitment to tackle high mortgage rates, including legislation if possible"



## tonymac (30 Apr 2016)

I see a great article in the independent today by a man who has highlighted our cause more than anyone, Charlie Weston regarding negotiations for the minority government. Credit also for Michael McGrath for making sure the SVR issue is included in the talks. Please god a solution will finally be reached through these talks although like everyone else I'll wait until action actually happens before we can actually mark a long deserved success for our campaign. Charlie mentions that It will come down to the new minister for finance placing the appropriate pressures to see reductions in the SVR'S so I do hope that won't take too long because if it does we need to continually remind him how serious this issue is. It also highlights that PTSB have admitted that they are no longer losing money on their tracker books, so surely the others, operating in similar conditions couldn't be very different. I to be quite frank don't care about any cost of funding, repossession legislation  or any other excuses for the banks not reducing the rates anymore, nor do I want to hear any counter arguments about this, the ECB rate is 0, yes 0% and the cost of funds etc is 0.55%-0.7% and were paying upwards of 4%. What I want and ASAP are average eurozone SVR rates. I am also very surprised that there hasn't been a huge response to Charlies article on this site so I do hope my posting generates a real response and not a debate as to reasons why the banks are not acting, the banks are being backed into a corner and are running out of excuses.


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## INALLFAIRNESS (30 Apr 2016)

Fully agree, but fear that it will turn out to be empty promises


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## Clonback (30 Apr 2016)

Tony
A little bird told me Michael McGrath is playing a blinder on the rip off interest rate issue.
Hopefully the Independents dont stall the progress.


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## tonymac (30 Apr 2016)

Please god, people playing politics is of course a big threat but in fairness Michael McGrath has played a blinder on our issue for a long time. The main thing is he carries things into government. The thing is the pressure needs to be applied to whoever gets in and it needs to be kept on because this for me is the final chance for us to get a result.


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## rodger (30 Apr 2016)

Why was fine gael so lame on the issue?

They were only capable of doing the bidding of Europe


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## tonymac (30 Apr 2016)

They for me didn't want to rock any boats with their european friends but they've got away with that for long enough. I wouldn't hold my breath but I'd be delighted if I knew that FG lost a few seats because of their lameness on this issue, my instincts tell me otherwise though in that they lost more due to the water charges issue. Charlie Westons article brings it home to people that were being savaged and the likes of FG, the banks and the " consumer protection organisations " are running out of excuses for their disgraceful approaches to this issue. The FSO has been nothing short of a disgrace on this issue but especially the withholding of the proper rates for people who had trackers removed illegally.  The current FSO hasn't acted for the ordinary person, only for the banks and should resign ASAP and take up a role as a bank official for any of the main banks because he's behaved like he's getting payed by them to go against the ordinary people. The central bank has launched an investigation into the banks behaviour regarding trackers and not before time, I just wish it was broadened to include why they've allowed our banks to charge the highest SVR rates in Europe for so long and and have been allowed to get away with it, the only problem with that is theyre own behaviour has been so bad it couldn't be done they'd come out of it badly themselves, thus the reason why any investigation would need to be totally independent of them because they've totally forgotten that they've got a role as a consumer protection advocate, what a joke and any hope that Philip Lane might be different for me has gone.


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## Brendan Burgess (1 May 2016)

Hi tony

I can't find the article online.

Can you provide a link or the title of the article.

The only thing I have seen is this article.  Apparently, the deal just has bullet points: 

■ A commitment to tackle high variable mortgage interest rates, including legislation if possible.


Brendan


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## tonymac (1 May 2016)

Brendan Burgess said:


> Hi tony
> 
> I can't find the article online.
> 
> ...


Hi Brendan, I'm not very techno savy,  I'm going on Charlie Westons article in yesterday's indo, it was the lead story. The "if possible" bit I didn't see. There were a few more articles inside about it and as I said in my posting the other day it sounds promising but we won't believe it till we see the evidence. Everything in it says there are no more excuses for the banks,  eg the reference to the admission by PTSB that theyre now making profit on trackers.


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## Brendan Burgess (1 May 2016)

Thanks tony

What was the headline? 

Brendan


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## rodger (1 May 2016)

Cut to interest rates on the way

http://www.broadsheet.ie/2016/04/29/de-saturday-papers-159/

See the indo


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## tonymac (1 May 2016)

Thanks Rodger and hi Brendan im referring to the front page story on yesterday's indo, CUT TO INTEREST RATES ON THE WAY. Nobody's getting carried away but  please god. Michael McGrath influence on government talks, just shows how bad the FG people have been for us on this if It can suddenly become possible to do something for us by  them agreeing through the deal for government.


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## coolhandluke (1 May 2016)

Anything that costs the banks money will be long fingered, especially if Noonan gets back into finance.


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## Gordon Gekko (2 May 2016)

Political gombeenery won't change rates. Competition will. Frank Money's rates will be circa 2.75%, which will force the existing banks to lower their rates.

The last thing that's required is hamfisted political interference which is more likely to scare off potential entrants.


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## Paul Reilly (4 May 2016)

I wrote to Michael McGrath about this and he told me there are serious negociations going on about Mortgage.

As all of us who voted know  Fine Gael are an anti mortgage fairness party by the looks of things so after voting for them all my life I had to change to Fianna Fail. However I did reiterate to Michael that never again am I voting Fianna Fail if they dont make the difference they promised in their manifesto and address the mortgage issue.

The difference I think is that Michael Mcgrath feels strongly about this and thats good


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## demoivre (4 May 2016)

Gordon Gekko said:


> Political gombeenery won't change rates. Competition will. Frank Money's rates will be circa 2.75%, which will force the existing banks to lower their rates.



How will it force existing banks to lower the rates they charge borrowers who can't switch lender ?


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## 44brendan (4 May 2016)

demoivre said:


> How will it force existing banks to lower the rates they charge borrowers who can't switch lender ?


Which is exactly the kernel of this issue! Nobody has come up with an option where any Government can effectively legislate on this issue. Pat Breen TD was interviewed on Morning Ireland today and the point was put to him as to how this issue would be implemented. He kicked it to touch and effectively it is aspirational only. No legislation will be introduced as it could be contested as restrictive and contested in the Courts.
See above post by Gordon Gekko!! This is the only option for a rate reduction!


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## Sarenco (4 May 2016)

demoivre said:


> How will it force existing banks to lower the rates they charge borrowers who can't switch lender ?



Increased competition would certainly benefit such borrowers if we introduced a statutory % cap on the rates that can be charged over the (rolling) average rate charged on all outstanding variable rate mortgages (including trackers).

The French have had laws to this effect since the 1960s so there is no reason to believe that this would cause a problem under EU law.  We already have laws that cap the interest rates that can be charged by money lenders and credit unions and I have never heard anybody suggest that this legislation is questionable in any way.

However, if Michael McGrath ever succeeded in implementing his idea that the State (rather than the market) should fix mortgage rates, we could forget about any new entrants to the market.  Why would anybody enter a market where the State can tell you what you can charge for your product?  This idea, if implemented, would inevitably result in higher mortgage rates in the medium term due to a lack of competition.  Political posturing, pure and simple.


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## todo (4 May 2016)

Sarenco said:


> Why would anybody enter a market where the State can tell you what you can charge for your product?



Why would someone enter a contract where one party of the contract has complete control over the interest rate. We all do stupid things, but you could be right lenders are allot smarter then the consumers they trap.


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## michaelm (4 May 2016)

Gordon Gekko said:


> Frank Money's rates will be circa 2.75%, which will force the existing banks to lower their rates.


Banks should be legally obliged to make any lower rates available to current customers and not just new business.  In such a situation competition may well drive down rates for all.


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## 44brendan (4 May 2016)

todo said:


> Why would someone enter a contract where one party of the contract has complete control over the interest rate.


They consistently have done so and continue to do so!! SVR is effectively such a contract and at the moment is the only option available to all borrowers who don't fix their rates.


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## tonymac (4 May 2016)

One potential solution for me is instead of extending mortgage interest relief which I have been an advocate for, how about using that money along with a government bond issue or whatever it takes to raise the necessary capital required instead as well as the fact that we own AIB and PTSB and inject money into those 2 banks with specific instructions from the new minister for finance to reduce their SVR rates  to somewhere near the EU average. This would surely put serious pressure on the other thieving banks to reduce their rates, the minister is after all representing our interests in these banks or at least he should be. As far as I'm concerned I don't give a damn about it breaking any ECB rules seeing as this country's been fed to the wolves already, it would be about time something was done for the ordinary people instead of senior bond holders and their like. If people in this country are prepared to tolerate high SVR rates and not take to the streets then something radical needs to be done because the banks will sit back for all time on this if let.This would certainly create competition that those greedy so and sos in the likes of BOI would have to take note of. Their recent agm highlighted profits again of which quite an amount comes from us gombeens and which goes into some of  the best paid managers pockets, imagine a salary of approx 900,000 a year, nearly 4 times Enda Kennys salary.


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## 44brendan (4 May 2016)

tonymac said:


> e fact that we own AIB and PTSB and inject money into those 2 banks with specific instructions from the new minister for finance to reduce their SVR rates to somewhere near the EU average


Not a realistic option Tony as Government priority is to divest themselves of these banks ASAP. Interference in their operations is not an option if they want to sell their interests.


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## tonymac (4 May 2016)

44brendan said:


> Not a realistic option Tony as Government priority is to divest themselves of these banks ASAP. Interference in their operations is not an option if they want to sell their interests.


 I do appreciate that fact 44brendan but at the end of the day an injection would surely increase switcher business in favour of the 2 of them. I also know you'll probably tell me once they go private they'll put rates back up again. If my option is not realistic in you're opinion what do you think can and should be done to solve this and solutions such as increasing competition , accurate as they might be have already been put forward here. We need to get something going now out of the negotiations and while we still own those 2 banks.  We have after all been screwed like no other group and something radical is required,  just look at what's happened to the water charges which for me came from pressure. I am also sick to the teeth waiting for competition to emerge all the while the banks are taking €2,500/year average off each affected SVR holder. Our problem is we haven't applied any pressure and the banks are laughing at us, ive advocated things like public protest and a mortgage strike but I've also said I wouldn't do these unless there's significant support and im not talking about 100 people. Unfortunately too many people are either happy with the rates they're paying, they can't be bothered to switch or protest  or they don't realise what this is costing them. Imagine FF and FG spent all this time arguing about water charges and all due respects to that campaign they're only 10% of what we're losing. Anyone with any original proposals regarding what should be done ill gladly listen but other than maybe our great white hope Michael McGrath in these talks or something radical like I've suggested nothing else appears to be jumping out at anyone. Maybe Frank money might get approval before 2019 at the rate those pro - banks yo yo in the CB get to move on things.


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## Sarenco (4 May 2016)

44brendan said:


> They consistently have done so and continue to do so!! SVR is effectively such a contract and at the moment is the only option available to all borrowers who don't fix their rates.



Yep.  Around 50% of new borrowers are currently opting for variable rate mortgage, where the rate can be changed at any time at the discretion of the lender, rather than opting for fixed rate mortgages.


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## Sarenco (4 May 2016)

michaelm said:


> Banks should be legally obliged to make any lower rates available to current customers and not just new business.  In such a situation competition may well drive down rates for all.



Would that apply to all current customers? 

Or would lower rates apply to borrowers with smaller loans, lower LTVs, lower LTI and overall DTI ratios, shorter loan durations, no dependants, multiple sources of income, etc.? 

There are multiple factors of relevance in assessing the riskiness of a loan and surely you would expect a lender to demand a higher rate of interest for a higher risk loan.  No?

Also, would new entrants not get a "free ride" (as they have no current customers)?


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## rodger (5 May 2016)

Today's Examiner

http://www.irishexaminer.com/business/calls-for-mortgage-cuts-puts-focus-on-bank-funding-397719.html


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## rodger (5 May 2016)

It will be interesting to see how a minority FG behaves.

Will there be any action from Noonan on variable rates? 

Up to now he has been a pushover as far as BOI is concerned.


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## Delboy (5 May 2016)

rodger said:


> It will be interesting to see how a minority FG behaves.
> 
> Will there be any action from Noonan on variable rates?
> 
> Up to now he has been a pushover as far as BOI is concerned.


What do you think/believe Noonan can do with an independent institution such as BoI?


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## rodger (5 May 2016)

I know what he should do:

He should ensure they don't charge more than say ecb+3%

Because we are tired of bailing out the banks.

There was talk of a tax on banks if they failed to pass on the ecb cuts

What can he do?  He can legislate to protect bank customers who are also the tax payers who bailed out the banks.

From what I have read FF Michael mcGrath would do something.


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## Brendan Burgess (5 May 2016)

Michael McGrath has been speaking to the Times Ireland 

"The pledge does not contain any detail but Michael McGrath, Fianna Fail spokesman for finance, said that he wanted to bring forward legislation to give the Central Bank the power to “intervene in relation to interest rate policies”.

Mr McGrath said that variable rates, which affect at least 300,000 mortgage-holders, needed to be brought into line with other European countries. He said that the Central Bank (Variable Rate Mortgages) Bill 2015, which the party tabled last year, would balance the need for banks to be profitable and the rights of consumers to be treated fairly.

“This would act as a strong deterrent to prevent banks from charging excessive rates and would only necessitate Central Bank action where the evidence points to a clear market failure,” he said. “We do not believe this would act as a deterrent to competition. Other European countries have successfully introduced legislation which has put downward pressure on mortgage rates.”"


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## Delboy (5 May 2016)

Has any Eurozone country legislation in place to control the interest rates set by private banks?


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## Sarenco (5 May 2016)

Delboy said:


> Has any Eurozone country legislation in place to control the interest rates set by private banks?



No.

I have no idea what Michael McGrath is talking about.

France has legislation in place that limits the rate that can be charged to 133% of the market average rate on all outstanding mortgages over the previous quarter but no EZ states vests a power in any State official or institution to fix or cap mortgage rates. 

Fixing the price of credit in this way would be totally inappropriate in a free market economy.  It's really not a viable proposal.


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## SallyM (5 May 2016)

On Prime Time the other night Michael McGrath said something to the effect that, under the new poliitial deal, when he puts forward a bill on the standard variable rates it would now pass (presumably because FG won't vote it down).  Fair play to this man - who has consistently brought the SVR issue up.  Like an earlier poster, I gave my vote to FF based on how Michael McGrath had fought for us.  I feel very much betrayed by FG who could have done something for us ages ago.  Very very foolish of them.  There are a lot of the 300k mortgage holders out there who are not engaged with our campaign - but if/when Michael McGrath brings through legislation and they see a deduction in their mortgage payments I hope they give FF the credit.  (btw I am a former FG supporter/voter).


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## Sarenco (5 May 2016)

SallyM said:


> On Prime Time the other night Michael McGrath said something to the effect that, under the new poliitial deal, when he puts forward a bill on the standard variable rates it would now pass (presumably because FG won't vote it down).



No mention of that in the published deal:

http://www.irishtimes.com/news/poli...ael-fianna-fáil-deal-for-government-1.2633572


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## Delboy (5 May 2016)

SallyM said:


> On Prime Time the other night Michael McGrath said something to the effect that, under the new poliitial deal, when he puts forward a bill on the standard variable rates it would now pass (presumably because FG won't vote it down).  Fair play to this man - who has consistently brought the SVR issue up.  Like an earlier poster, I gave my vote to FF based on how Michael McGrath had fought for us.  I feel very much betrayed by FG who could have done something for us ages ago.  Very very foolish of them.  There are a lot of the 300k mortgage holders out there who are not engaged with our campaign - but if/when Michael McGrath brings through legislation and they see a deduction in their mortgage payments I hope they give FF the credit.  (btw I am a former FG supporter/voter).


Don't forget who was in Govt supposedly managing the economy when the Banks were going mad. Lets not get all pious about FF and paint them to be some sort of modern Robin Hoods.
And lets see if anything can be done because I just cannot see how it is possible for a Govt in the Eurozone to set interest rates for the mortgage business of private banks.


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## demoivre (5 May 2016)

Brendan Burgess said:


> Michael McGrath has been speaking to the Times Ireland
> 
> "The pledge does not contain any detail but Michael McGrath, Fianna Fail spokesman for finance, said that he wanted to bring forward legislation to give the Central Bank *the power to “intervene* in relation to interest rate policies”.



I fear for SVR borrowers if that's all the legislation does. Lane will be far more concerned with the profitability of the banks than the plight of hard pressed borrowers imo.


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## tonymac (5 May 2016)

The thing is in this country we bailed out the banks and what do they do they abuse 300k of the people who helped pay for the bailout by charging the highest SVR'S in Europe, this despite the lowest ECB rates in history because they can. The banks in this banana Republic of ours don't deserve to be treated like a normal bank in a functioning economy because they've abused their right to set rates like no other eurozone country has and as a consequence they should be taught a lesson until they learn manners,  eg a law that keeps them in line where they should have to justify their reasons for keeping rates high and if they can't then no increases.


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## rodger (5 May 2016)

That hits the nail on the head!


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## Brendan Burgess (5 May 2016)

And it appears to also include concrete proposals to raise mortgage rates. 

_"The Irish Times_ understands one of the measures ... is the creation of a new body which will seek to assist homeowners facing repossession.

Under this proposal a court will be unable to hear a repossession case until it has been processed by this new agency and all resolution options examined."


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## Sarenco (5 May 2016)

Brendan Burgess said:


> And it appears to also include concrete proposals to raise mortgage rates.



Yup.

The FF/FG deal includes a commitment to "protect the family home and introduce long term solutions for mortgage arrears cases" AND "take all necessary action to tackle high variable rates" (they seem to have dropped the reference to introducing legislation in the final text).

In practice these policies are contradictory.  The politicians obviously know that but as long as the electorate continues to blame banks for high mortgage rates they continue to get off scot free.  

If we are prepared to accept high levels of mortgage arrears then we have to be prepared to accept high mortgage rates.  It really is that simple.


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## tonymac (5 May 2016)

A point that needs to be hit home to Michael McGrath if it were to come to pass. I certainly don't want to see genuine people lose their homes that are willing to work with the banks etc to work out a payment schedule  but they shouldn't be allowed stay in them long term if it's at SVR holders expense. I don't know what way they deal with repossessions and arrears in other countries, maybe someone can enlighten us but similar measures could be set up here once it's seen how these countries do it. As we all agree ill believe it when I see it re anything coming out of this that actually helps us as I also see the point about contradictory policies. When I saw Brendan mentioning a rise in rates I said he's  having the crack which I hope he is but if not blue murder needs to be raised as we've suffered enough.


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## Brendan Burgess (5 May 2016)

I am not having any craic at all.  The reality is that it's impossible for lenders to repossess homes. That has to be factored into mortgage rates for high LTV loans i.e. loans with an LTV over 80%.

It also makes arrears worse.  When borrowers realise that there is no sanction for not paying their mortgages,they won't pay them. 

Someone has to pay and the only party who can pay are those with non-tracker mortgages.

Brendan


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## Andy836 (5 May 2016)

The hilarious thing is the IT is reporting the Central Bank and the Competition & Consumer Authority are going to be asked to investigate why there's no competition in the market.

In the same breath as they're making it harder to repo properties.

This is potentially an appalling agreement.

Direct Quote from the Draft Document:
_
"We support the need to develop an overall banking policy that encourages new entrants and a vibrant banking sector with real competition in order to provide more choice to mortgage holders"_


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## rodger (5 May 2016)

When you consider the existing rates say 4.5% 
That's 4% pure profit when cost of funds are 0.5%

Say a mortgage of €300,000

That's €12,000 profit per year

If 99 customers are paying and 1 customer is not paying per 100 customers
instead of making €1.2m profit they only make €1,188,000 profit


Now if they reduce rates to 2.5%
They make €600,000 per 100 customers

And if one customer didn't pay they still make €594,000

That's interest-only per 100 customers per year.

Pure profit


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## rodger (5 May 2016)

Brendan Burgess said:


> I am not having any craic at all.  The reality is that it's impossible for lenders to repossess homes. That has to be factored into mortgage rates for high LTV loans i.e. loans with an LTV over 80%.
> 
> It also makes arrears worse.  When borrowers realise that there is no sanction for not paying their mortgages,they won't pay them.
> 
> ...




Why only non-tracker can pay? Do you mean only trackers can afford to pay?

This is another aspect to the high interest rates:  that is what is causing the arrears!

If the bill is €6,000 per year it's affordable

If the bill is €12,000 it's not so affordable, hence the arrears.


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## tonymac (5 May 2016)

Appalling if this turns out to be the case. With the notable exceptions of a number of people on this site other than regulatory authorities and the banks I also place a large portion of the blame on the thousands of SVR holders who have done nothing, if it comes to pas the way some of you say.Maybe traitor is a strong word but I'd include a lot of them as you can see from the water campaign what can be achieved by enough people willing to do protest publicly etc. I know it'd harder for us to not pay up as our credit ratings would be gone but radical  ideas for me are needed if our hopes are stymied  yet again. The banks and the other authorities have walked all over us and laughed at us as they've been allowed to do what they want with no resistance bar the commendable efforts of Brendan and people on this site  so I suppose we shouldn't be surprised if it happens again and to think we've been let down by our fellow SVR holders, worst of all. I must admit I shouldve known when only 130 turned up at the burlington, maybe I'm being naieve but I thought thery'd be 500 there at least and they knew it too.


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## rodger (6 May 2016)

Fully agree Tony.

Two other reasons for the lack of action in the variable:

50% of people are on tracker. They don't care.
Some people on variable hope to be put back on tracker

People on variable are being screwed. They don't know where to turn. In addition there was the downturn in the economy. 

Most people on variable probably bought back in the 90s and have low enough mortgage balance. They're okay.

It's people with big mortgages who bought in noughties. They maybe were originally on tracker. And then fixed. And then the banks refused to put them bank on tracker. Incorrectly.

They're the ones I feel sorry for.


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## Sarenco (6 May 2016)

rodger said:


> When you consider the existing rates say 4.5%
> That's 4% pure profit when cost of funds are 0.5%
> 
> Say a mortgage of €300,000
> ...



A few (pretty obvious) points:-

1.  Average mortgage rates are a lot lower than 4.5%;
2.  Nowhere even close to 99% of borrowers are currently meeting their contractual obligations; and
3.  You are ignoring the fact that banks have to set aside capital to deal with loan defaults (don't forget their obligations to depositors).

If the reality looked anything even remotely like you suggest, we wouldn't have high (non-tracker) mortgage rates.  

Unfortunately, we all have to live in the real world.


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## Sophrosyne (6 May 2016)

Brendan Burgess said:


> I am not having any craic at all.  The reality is that it's impossible for lenders to repossess homes. That has to be factored into mortgage rates for high LTV loans i.e. loans with an LTV over 80%.
> 
> It also makes arrears worse.  When borrowers realise that there is no sanction for not paying their mortgages,they won't pay them.
> 
> ...



Brendan,

I confess to know little of how banks arrive at their SVR rates.

It has been much contended on this site that, in Ireland, they are very much influenced by the sluggish repossession process.

Is there any published data as to the methodology used by Irish banks to factor in mortgage arrears in arriving at SVR rates?


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## rodger (6 May 2016)

Sarenco said:


> A few (pretty obvious) points:-
> 
> 1.  Average mortgage rates are a lot lower than 4.5%;
> 2.  Nowhere even close to 99% of borrowers are currently meeting their contractual obligations; and
> ...



The reality is BOI is charging 4.5%


That's the reality


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## qwerty5 (6 May 2016)

rodger said:


> The reality is BOI is charging 4.5%
> 
> 
> That's the reality



And KBC have a rate of 4.25%. This is a bank that we didn't bale out.

I think rather than fluting around pretending they're going to regulate rates we'd be in a better position if there was some system where it was easy to switch. As it is now it's a tedious and expensive process with frequent repeated requests for documentation. E.g. we need copies of your credit card bills and then, we've been so slow with your application we need new up to date copies of those.

I'm almost switched from KBC to UB. I applied to BOI too. The amount of documentation required is quiet large and it's going to cost me a grand. I don't know why I'm paying this grand but it has to be done apparently.
I'm switching from a 4.05% mortgage to a 3.2% mortgage purely to save money and I've been going back and forth for months now.
It doesn't help that the mortgage advisers in the banks (both banks) are extremely slow to respond to any question. I actually gave up on BOI as I got an offer letter in with a rate that changed a week later. I rang, left voicemails, emailed the adviser at my local bank and emailed the adviser at their HQ to try and get a new offer letter. It seemed impossible so I gave up on them (probably saved me money in the long term).
In fairness to BOI the UB guy isn't super efficient either but at least he gets back when I chase him up.

If we could switch mortgage providers with a standardised easy process the banks (like KBC & BOI) might give more of a damn about reducing rates for their existing customers.


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## rodger (6 May 2016)

And for investment mortgages BOI variable rate is 5.65%


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## qwerty5 (6 May 2016)

Brendan Burgess said:


> The commitment by Mr McGrath means there is likely to be swift progress over variable rates, of which Ireland has the highest in the eurozone.



I am holding my breath 
Swift in political terms might mean next year.


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## gnf_ireland (6 May 2016)

Hi all

I know I have been very quiet on this issue for the last while, but like a lot of others I have been waiting to see what will happen with Frank Money & the election, as well as other elements of life taking over.

Sadly, I also have come to realise this is not an easy scenario to fix. However, what I would like to see happen is:
1. Legislation around treating existing and new customers equally. Any 'promotional' activity should be no longer than 1 year in duration
2. A general acceptance that if the repossessions issue is resulting in higher SVR & Fixed rates - the question is who should pay for them? Should it be a government subsidy if its their policy or should a subset of customers pay for the actions of others? At this stage, I think any campaign needs to focus on this "cost of repossessions"
3. A general acceptance that while our repossessions issue exists, there will be no new entrants to the market. All groups need to realise that they are interfering with the mortgage market at the moment, and it cannot be one sided only.

Overall, I would love to see a scenario where it would be possible for someone with a LTV <70%, who has been paying their mortgage on time every month to date be able to go and get a 15/20 year (remaining term) fixed term mortgage product (based on very conservative lending criteria) at a reasonable rate - say 3%. This would surely be an attractive proposition, and one which I hope would stake up the market. At this stage, I believe a big shake-up is needed and the best way to do this is to bring in new and innovative products.

I fear that the conflicting asks of more difficult repossessions and lower rates are contradictory, but the big question is who should pay for the former !


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## gnf_ireland (6 May 2016)

qwerty5 said:


> Swift in political terms might mean next year.



Something is better than nothing ! Nothing is what we have for the last number of years

Even if this was to help people who could not switch, it would be a positive development !


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## BillyO (6 May 2016)

qwerty5 said:


> I am holding my breath
> Swift in political terms might mean next year.


Exactly..

Also remember that a lot of noise was made during the Variable rate campaign and the government got involved. In the end we saw (in PTSB's case) a reduction of .2% if you were in NE. We went from 4.5% to 4.3% after that huge effort. Imagine this time next year we could be at 4.2%...can't wait.

If only we could force a massive boycott of variable holders paying their mortgages. Given the difficulty of repossessing then the banks might actually listen.


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## gnf_ireland (6 May 2016)

BillyO said:


> If only we could force a massive boycott of variable holders paying their mortgages.



This is never going to happen, and for many good reasons. People like myself, while we acknowledge we are being screwed, are not going to stop paying our mortgages just because others don't. 

That would be some lessons to teach our children - if you sign up for something, but they decide you don't like it, don't pay and someone will come rescue you.

The biggest issue with this campaign is that it tries to be all things to all people. Someone like me on >30% LTV believes I am being screwed because I consider myself as very low risk. This is a different scenario to someone who is on 90% LTV or in negative equity and cannot move and are therefore entrapped by whatever the bank wishes to charge them.

However, the latter would be deemed high(er) risk mathematically and hence lies the issue. We cannot have it all ways, so we are either trying to have fair rates for fair risk (meaning higher risk may go up) or we are trying to assist those who cannot switch from being screwed completely.

Increased competition will help me (if it ever comes) whereas it wont help someone in negative equity ! This is where I hope the FF bill would provide some assistance.


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## tonymac (6 May 2016)

gnf_ireland said:


> This is never going to happen, and for many good reasons. People like myself, while we acknowledge we are being screwed, are not going to stop paying our mortgages just because others don't.
> 
> That would be some lessons to teach our children - if you sign up for something, but they decide you don't like it, don't pay and someone will come rescue you.
> 
> ...


It would be wouldn't it but at least the kids would see a committed group of people fighting for the cause they believe in and you can't argue with that. While I agree with you're sentiment I am also aware I'd have to repay witheld money at some stage which I would, all I would do is put it beyond the banks reach until things get sorted. If we could get enough to do that we might achieve something. What I don't like is being screwed for a long time and letting them get away with it, this coming after we yes we helped bail them out after they almost bankrupted the country. This is why I have utter contempt for our banks. A mortgage strike is not something I'd like to do but if nothing comes out of things in the near future then I think it's time for radical action,  whether it's a strike or otherwise.


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## Sarenco (6 May 2016)

rodger said:


> The reality is BOI is charging 4.5%



Nobody should still be paying 4.5% - BOI have a one year fix available for LTVs over 80% @3.65%.  

In any event, BOI is charging an average rate of less than 3% to existing customers.


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## Sarenco (6 May 2016)

gnf_ireland said:


> Increased competition will help me (if it ever comes) whereas it wont help someone in negative equity !



It would if we introduced a % cap on the rates that can be charged over the (rolling) average rate charged on all outstanding variable rate mortgages (including trackers).

A measure along those lines would provide a degree of protection to those borrowers that cannot switch lenders and they would still benefit from any reductions in average rates.  Importantly, potential new lenders would not be discouraged from entering the market.

But you're right - ultimately this debate comes down to a judgment as whether you believe the State is better placed to price risk than the market.

Passing a law that gives an institution a power that it can't/won't exercise is futile (beyond generating press for the politician that proposes the measure).


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## 44brendan (6 May 2016)

Brendan Burgess said:


> Under this proposal a court will be unable to hear a repossession case until it has been processed by this new agency and all resolution options examined."


I would agree with this! However such an agency would need to be impartial and make a decisions based on the specific circumstances of each case which would mean in some case a sale of the PDH being the only option.


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## Gordon Gekko (6 May 2016)

I've said it before and I'll say it again...competition is the only thing that will resolve this issue. Hamfisted political gombeenery will merely scare off potential entrants into the market. Government needs to make it easier to enter the market. For example, why are Frank Money not up and and running yet? Rate caps etc will stop the likes of Santander from opening here. Why doesn't the State nationalise the management of a bank (e.g. PTSB), and set its variable rate at (say) 2.5%?


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## Brendan Burgess (6 May 2016)

Gordon Gekko said:


> I've said it before and I'll say it again...competition is the only thing that will resolve this issue.



Repeating something doesn't make it true. Competition will help only those borrowers who are free to move. It will not help people who are in negative equity or who have been in arrears. 

Brendan


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## tonymac (6 May 2016)

Hi Gordon, I haven't exactly proposed nationalisation but it might as well be.  I proposed earlier in this thread that instead of extending TRS how abt capitalising the state owned AIB  and  PTSB  but on the instruction that they bring down their SVR  to say the eurozone average. Also make it easier to switch to them and that should have the desired effect.  44BRENDAN did make me obvious point that the government and the CB only want to get out of the banks, but reducing the rates would generate a lot of new business wouldn't it. When BOI and others moan about it being unfair tell them now you know what it's like to be an SVR mortgage holder and we'll do it because we can . When the ECB come looking for answers tell them give us back our 64 billion or at lest go some way towards it 1st seeing as they've constantly refused to give ireland a proper deal on our legacy debts.


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## Gordon Gekko (6 May 2016)

Brendan Burgess said:


> Repeating something doesn't make it true. Competition will help only those borrowers who are free to move. It will not help people who are in negative equity or who have been in arrears.
> 
> Brendan



That isn't a reason to stifle competition though. In many ways, it's a circular argument. The most important issue is rates generally. If Santander or Frank have an SVR of 2.7%, that benefit will flow to everyone. And what proportion of negative equity and arrears cases are on SVRs in any event? Surely most distressed mortgages are on trackers if they date from 2005 to 2008?


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## tonymac (6 May 2016)

Before anyone ridicules my last posting for being unrealistic,  I'm well aware how unlikely that it would happen that way although revenge would be sweet wouldn't it. What I will say is isn't it a pity nobody will stand up for the ordinary people by being different and actually do something like what I proposed.  They'd get great respect for standing up to the banking and ECB bullies and even if they threatened us with removal from the eurozone don't forget Greece owe a lot more than us and at the end of the day they weren't cast adrift.


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## Andy836 (6 May 2016)

Brendan Burgess said:


> Repeating something doesn't make it true. Competition will help only those borrowers who are free to move. It will not help people who are in negative equity or who have been in arrears.
> 
> Brendan



But why should people with 100%+ LTVs or those with a track record of arrears have their rates lowered? They are clearly higher risk.

As GNF stated, there are vastly different risk profiles between someone with a 30% LTV and someone with a 90% LTV.

To clarify. I don't think those in negative equity or those with recent arrears records deserve rate reductions. 

This is similar to the the whole Social Housing funding model. One cohort of the public is bearing the brunt for something which should be shared by a much wider base.
- The cost of new social housing has been borne in recent times purely by new-build purchasers - via Part V costs [the rest of the country wasn't funding it]. That's not fair.
- The cost of defaulted mortgages (and trackers) is being borne in recent times purely by SVR holders - [the rest of the country/tracker customers aren't funding it]. That's not fair.

Given the Irish Banks aren't generating supernormal profits at group levels, the only way to maintain the Banks' existing level of profitability AND allow for a reduction in SVRs is to sort out the defaulted mortgages and the trackers.

Twiddling around the edges with announcements of pending legislation or "investigations" aren't going to solve these problems.


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## Brendan Burgess (6 May 2016)

Andy836 said:


> But why should people with 100%+ LTVs or those with a track record of arrears have their rates lowered? They are clearly higher risk.



Hi Andy 

I am absolutely clear that lower risk borrowers should pay lower rates.  But Gordon was claiming that competition would resolve the issue. It will not resolve the issue for someone paying 4.95% to Danske Bank who can't move. 

That is why I suggested that the best way is to limit interest rates to 3% above the ECB rate. If a lender wishes to charge more, they would have to justify it to the Central Bank and get their approval. The CB may well approve rates higher than 3%.  But the lenders would have to justify them.


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## 44brendan (6 May 2016)

Brendan Burgess said:


> That is why I suggested that the best way is to limit interest rates to 3% above the ECB rate. If a lender wishes to charge more, they would have to justify it to the Central Bank and get their approval. The CB may well approve rates higher than 3%. But the lenders would have to justify them.


Issue was discussed today in an informal meeting with banking colleagues. General consensus was that such a limitation would be fair provided that it accurately reflected a risk premium up to a designated maximum (appeals could be allowed for fairness). However I'm sure that those responsible for overall profitability of the banks would not be so agreeable!


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## Andy836 (6 May 2016)

Brendan Burgess said:


> Hi Andy
> 
> I am absolutely clear that lower risk borrowers should pay lower rates.  But Gordon was claiming that competition would resolve the issue. It will not resolve the issue for someone paying 4.95% to Danske Bank who can't move.
> 
> That is why I suggested that the best way is to limit interest rates to 3% above the ECB rate. If a lender wishes to charge more, they would have to justify it to the Central Bank and get their approval. The CB may well approve rates higher than 3%.  But the lenders would have to justify them.



I don't agree with that Brendan. I don't agree with any interference with rate setting. Furthermore, I believe the Central Bank has said they do not want such a power. Also, how would it work - would it be retrospective - i.e. apply to existing loan contracts? Would it have to be justified on a case by case basis or could it be done on a general basket basis?

Someone who cannot switch obviously isn't a "low risk" Borrower as they don't qualify under the new central bank rules. I don't believe they should get a free ride on the backs of others.

I fully support bifurcating the market between (i) lower rates for lower risk, (ii) higher rates for higher risk. Perhaps Banks need to start investing in tech & data to allow individual loan level risk pricing. That's possibly not realistic with the main banks at this stage - I'd dare say their systems are miles behind those of specialty lenders with dynamic pricing models.


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## Dje@home (6 May 2016)

Hello everyone

I was reading on this forum for quite some time and I wanted to participate on this piece.

I am looking around at the moment to go for a mortgage and I am shocked to see how bank screw the locals in Ireland the worst thing been that the government seems Ok with that and the consumer regulator is just doing nothing.

there are things that shock me particularly.
1) you cannot get a mortgage with fixed interest rate fixed for the lifetime of the mortgage why is that ? banks selling this type of product lik KBC in Belgium sell 25 fixed 1.85 % mortgage.
the do seem healthy enough to have ventured in the Irish market ...

2) why are the variable rate not capped I mean if you take a look again raising interest raise where a part of the subprime crisis that caused the financial meltdown that which in turn, caused the Irish housing bubble to explode I yet do not understand why consumer protection against this kind of mortgage not been put in place.

I believe if you ensure that the mortgage is sustainable there would be no area negative equity or not.
I do find the central bank income ratio on mortgages to be a sensitive rule and this should be left in place as the central bank played exactly it's role when they brought it up in place at the first time.

but if fixed rate or capped variable where the norm there would not need to be that tough because the bank and the consumer would know from the start how mutch the mortgage will cost for the whole life of the mortgage.

As for now there is nothing that ensure you that a 3.5 % interest rate mortgage do not become a 6 or 10  % one in 2-3 year ( even if this is unlikely there is nothing to stop the bank to do so as it please) making the mortgage unsustainable and driving it to area, which is for me pure madness.

One have to know that only 5% of the mortgage (since dodd frank and bale 3) value stay in the bank book the rest of the value is repackaged and sold back to investor and I don't think Irish bank sell such high-value return rate product to external investor (but I might be wrong).

that was my piece of thought.


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## rodger (6 May 2016)

Gordon Gekko said:


> That isn't a reason to stifle competition though. In many ways, it's a circular argument. The most important issue is rates generally. If Santander or Frank have an SVR of 2.7%, that benefit will flow to everyone. And what proportion of negative equity and arrears cases are on SVRs in any event? Surely most distressed mortgages are on trackers if they date from 2005 to 2008?


If they're on tracker then they're not distressed


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## shane732 (6 May 2016)

So I have a BOI variable rate now of 4.5%. I was thinking of fixing for a period - my payment would drop by €150 a month. I'm wondering whether I should leave it. Having that even if they do bring in legislation will rates drop below the current fixed rates? 

Perhaps I should fix for one year?


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## rodger (6 May 2016)

Good question

What is the fixed rate?

Michael mc Grath interviewed on 6 one news

The second thing he said was he hopes to reduce variable interest rates


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## Sarenco (6 May 2016)

shane732 said:


> So I have a BOI variable rate now of 4.5%. I was thinking of fixing for a period - my payment would drop by €150 a month. I'm wondering whether I should leave it. Having that even if they do bring in legislation will rates drop below the current fixed rates?
> 
> Perhaps I should fix for one year?



BOI's one year fixed rate for LTVs over 80% is 3.65%.

Is it possible that BOI's SVR will fall below 3.65% in the next 12 months?  Yes, it's certainly possible but it doesn't look very likely at the moment.

Is it possible that BOI's SVR will fall quickly enough and far enough that you would be better off not taking the 1 year today?  Again, it's possible but that looks even more unlikely.

Even if BOI's SVR fell from 4.5% to, say, 3% in six months' time, you would still come out well ahead after 12 months if you fixed @3.65% today.

If you can't switch, it makes sense to take the 1 year fix.


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## Paul Reilly (6 May 2016)

Wrote this already but does anyone know if mortgage relief is until 2020? 

Lower Variables definitely on way but banks wont lose out because even if they do reduce variables theyl put up fees to .40c a transaction to make up. 

Variables were meant to track the euro base rate so in essence the bank owes us variable rate holders thousands


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## Sarenco (6 May 2016)

Paul Reilly said:


> Wrote this already but does anyone know if mortgage relief is until 2020?



We don't know yet - the FF/FG deal simply says that MIR will be retained beyond the end of 2017 "on a tapered basis".


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## shane732 (6 May 2016)

Sarenco said:


> BOI's one year fixed rate for LTVs over 80% is 3.65%.
> 
> Is it possible that BOI's SVR will fall below 3.65% in the next 12 months?  Yes, it's certainly possible but it doesn't look very likely at the moment.
> 
> ...



I'm in the 60%-80% LTV category so the fixed rate is 3.4%. 

I was leaning towards a 3 year fixed but think I'll go for 1 year fixed. 

Awful when you look at the variable rates in the UK. My repayment could be €300 a month cheaper!!


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## Gordon Gekko (6 May 2016)

Fixing would appear to be an awful idea


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## Sarenco (6 May 2016)

shane732 said:


> I'm in the 60%-80% LTV category so the fixed rate is 3.4%.
> 
> I was leaning towards a 3 year fixed but think I'll go for 1 year fixed.
> 
> Awful when you look at the variable rates in the UK. My repayment could be €300 a month cheaper!!



Is there a particular reason not to to switch to another lender?  

The volume of borrowers that are refinancing their home loans with other lenders has increased dramatically over the last 12 months.  I know it's a pain but if you can get a materially better deal with another lender it's definitely worth the effort.


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## Delboy (6 May 2016)

Gordon Gekko said:


> Fixing would appear to be an awful idea


Not for 1 yr with the likes of BoI given the difference between SVR and Fixed


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## Gordon Gekko (6 May 2016)

I believe that SVRs will be 2.75ish before the Summer's out.

That's why fixed rates appear attractive.


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## Delboy (6 May 2016)

Rates will go down....but not by that much and not that quickly either


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## Gordon Gekko (6 May 2016)

How will BOI/AIB/KBC/UB deal with Frank who by all accounts will be offering mortgages and switches at 2.7%/2.8%?


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## Paul Reilly (6 May 2016)

While Variable Rates will likely go down the bank has major power. Especially the Central Bank.

I fear the government may bring the Variable Rate down a bit but Central Bank will intervene saying this is strategically unsustainable and the Cost of doing business in Ireland is too high to guarentee the necessary margin to adhere to the government stipulations. 

Therefore low variables may come but fair ones never will. No matter who rules the roost in government.

Thats why MIR is the only way forward


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## Delboy (6 May 2016)

'Fair rates' cannot come about here while we have world record rates of arrears/no repossessions and shenanigans such as what happened today in Limerick
http://www.thejournal.ie/armed-garda-limerick-court-protest-2756064-May2016/


> THERE WERE CHAOTIC scenes at Limerick Circuit Civil Court today as anti-eviction protesters took over the court and forced it to abandon hearing 170 home repossession orders.
> Limerick county registrar, Pat Wallace, who was hearing the cases, had to vacate the bench twice after protesters approached him and shouted at him.


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## shane732 (7 May 2016)

Sarenco said:


> Is there a particular reason not to to switch to another lender?
> 
> The volume of borrowers that are refinancing their home loans with other lenders has increased dramatically over the last 12 months.  I know it's a pain but if you can get a materially better deal with another lender it's definitely worth the effort.



The Stamp Duty offer has me tied in for 5 years.


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## rodger (7 May 2016)

Sarenco said:


> Nobody should still be paying 4.5% - BOI have a one year fix available for LTVs over 80% @3.65%.
> 
> In any event, BOI is charging an average rate of less than 3% to existing customers.



It's the variable rate we're discussing.

What is bringing the average down? Tracker?

That's why variable rate customers want to see rates come down because of the unfairness.


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## Sarenco (7 May 2016)

Gordon Gekko said:


> I believe that SVRs will be 2.75ish before the Summer's out.
> 
> That's why fixed rates appear attractive.



That is a very brave prediction Gordon. 

In the UK variable rates of less than 3% are common, but BOI UK's SVR is 4.49% and that is not out of line with the SVRs of other lenders in the UK.

I would be very surprised if BOI's SVR fell to anything like 2.75% over the coming months.  We'll see.


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## demoivre (7 May 2016)

Andy836 said:


> But why should people with 100%+ LTVs or those with a track record of arrears have their rates lowered? They are clearly higher risk.
> 
> As GNF stated, there are vastly different risk profiles between someone with a 30% LTV and someone with a 90% LTV



Why is a couple, both teachers, with a 100% mortgage more likely to default than a self-employed Carpenter with a 50% mortgage?


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## Andy836 (7 May 2016)

EL = PD x LGD x EAD

Payments on low ltv mortgage likely lower too.


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## Sarenco (7 May 2016)

Expected loss equation:
http://riskarticles.com/expected-loss-el-calculation/


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## rodger (7 May 2016)

Fair play to Charlie Weston telling it like it is

http://m.independent.ie/opinion/com...ect-bankers-to-roll-over-easily-34692644.html


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## demoivre (11 May 2016)

Andy836 said:


> EL = PD x LGD x EAD



Which brings home the point that I'm making. The only part of the right hand side of the equation that can be zero is PD, which, when it is, or even close to zero, means EL is zero or close to zero. PD for quality borrowers with quality income and job security would be very low, such as for two teachers.




Andy836 said:


> Payments on low ltv mortgage likely lower too.



Not necessarily the case at all.


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## Andy836 (11 May 2016)

Under Basel none of those variables, including PD, can ever be zero.

I accept your point that possibly the 2 public sector workers have better income security and may have a lower PD. This would have a large affect on the EL but it would be more than offset by their much higher LGD in practice - when time to recovery and associated costs/accrued interest was included.


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## demoivre (12 May 2016)

Andy836 said:


> Under Basel none of those variables, including PD, can ever be zero.



In theory maybe but in practice PD would be close to zero for many categories.




Andy836 said:


> I accept your point that possibly the 2 public sector workers have better income security and may have a lower PD. This would have a large affect on the EL but it would be more than offset by their much higher LGD in practice - when time to recovery and associated costs/accrued interest was included.



Don't see why that's necessarily the case at all. LGD is heavily dependent on PD so a very low PD will massively impact LGD and hence EL. There's a reason why , in the mad days, 100% mortgages were only given to certain occupations, and self employed carpenters weren't one of them.


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