Bank of Ireland reduce interest on warehouse to 2.5%, but only for loans in default
- Thread starter Brendan Burgess
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Brendan Burgess
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Hi ClubMan
I spoke to some arrears people in Bank of Ireland yesterday and you are absolutely right.
This statement from them is exactly and literally the position:
"Following consideration we have made a decision that for default owner-occupier customers on a non-tracker variable rate the split mortgage rate for the warehoused portion will be fixed at 2.5% per annum for a period of three years, assessed on a case-by-case basis; 2.5% being the rate at which the bank can currently borrow three year unsecured funds in the market,"
If a customer in default is given a split mortgage, the interest rate will be 2.5% on the warehouse.
If a customer who is not in default is given a split mortgage, they will continue to pay the SVR on the warehouse.
Brendan
I spoke to some arrears people in Bank of Ireland yesterday and you are absolutely right.
This statement from them is exactly and literally the position:
"Following consideration we have made a decision that for default owner-occupier customers on a non-tracker variable rate the split mortgage rate for the warehoused portion will be fixed at 2.5% per annum for a period of three years, assessed on a case-by-case basis; 2.5% being the rate at which the bank can currently borrow three year unsecured funds in the market,"
If a customer in default is given a split mortgage, the interest rate will be 2.5% on the warehouse.
If a customer who is not in default is given a split mortgage, they will continue to pay the SVR on the warehouse.
Brendan
As I said the wording is clumsy and not clear.
I don't know why they couldn't have phrased it more simply and maybe even summarised the criteria that apply.
As I said when I spoke to somebody in BoI they would not tell me what the criteria were.
Somebody in arrears is presumably in default but is somebody who might have missed a few repayments but then made them up and not have any arrears? Somebody restructured on, say, partial repayments, interest only, deferred interest?
I don't know why they couldn't have phrased it more simply and maybe even summarised the criteria that apply.
As I said when I spoke to somebody in BoI they would not tell me what the criteria were.
Somebody in arrears is presumably in default but is somebody who might have missed a few repayments but then made them up and not have any arrears? Somebody restructured on, say, partial repayments, interest only, deferred interest?
Brendan Burgess
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I wondered about this myself.
To be offered a split mortgage, a borrower must show that they can meet the repayments. If they can't meet the repayments, the mortgage will be categorised as unsustainable.
I think it's risky to intentionally miss a few payments. You might get a reduced interest rate on your split mortgage, or you might just get categorised as unsustainable.
I will suggest to BoI to change this policy as it could act as a disincentive.
Brendan
Clubman's friend presumably doesn't have time to wait for BofI to change policy. It's actually terrible that one would even have to suggest missing a few payments as a solution, but this is where we are in the Ireland of 2014.
What is the real risk of missing a payment or two, they surely wouldn't categorise him as unsustainable for that. How about a couple of below repayment amounts, make half a payment, make a full payment, make a 3/4 payment. Then he'd be in arrears but by a negligible amount, not an unsustainable amount.
The sad truth is that anybody who makes full payments aren't going to get help.
I think this is dangerous advice, an attempt to strategically default in this way will be obvious, and you'd face questions such as why did you suddenly need to spend 1k extra a month prior to wrangling for a split mortgage.
What it will do is make it harder for BOI to give out split mortgages and I'd guess BOI is looking for excuses to not give out split mortgages. BOI is getting surprisingly close to operating like a normal bank and a normal bank cannot have incentives for its customers to not repay their loans.
What it will do is make it harder for BOI to give out split mortgages and I'd guess BOI is looking for excuses to not give out split mortgages. BOI is getting surprisingly close to operating like a normal bank and a normal bank cannot have incentives for its customers to not repay their loans.
My friend's mortgage has already been deemed unsustainable by BoI and they have asked for it to be sold - no arrears and no missed repayments. Admittedly restructured on interest only and then deferred interest for the past few years. Bottom line is that repayments of c. €1K are realistic but this is short of the full capital + interest repayment (on outstanding capital balance + now capitalised deferred interest) of c. €1350 at the current variable rate of interest. There are other extenuating circumstances causing pressure. I can't go into detail about these or the wider case here right now. Anyway an appeal letter has gone in presenting these details (plus SFS etc.). The Phoenix Project in Portlaoise were very helpful in advising on how to draft the letter. I thought I did a good job on drafting it myself 
but they (and a few others) suggested some useful refinements.
BTW - in this case (and maybe many others?) the LTV is > 100% but reducing due to market movement. Ironically this could put the borrower in a worse position as it becomes more attractive to a lender to force the sale or repossess. I'd imagine that this LTV conundrum (paradox?) has been discussed elsewhere but I'm just not up to speed on AAM threads these days.
It's difficult to reassure somebody in this position but my understanding is that if my friend makes repayments of c. €1K - even if BoI don't engage and offer medium/long term restructuring - then it would be very unlikely for them to be able to force a sale or repossess.
but they (and a few others) suggested some useful refinements.BTW - in this case (and maybe many others?) the LTV is > 100% but reducing due to market movement. Ironically this could put the borrower in a worse position as it becomes more attractive to a lender to force the sale or repossess. I'd imagine that this LTV conundrum (paradox?) has been discussed elsewhere but I'm just not up to speed on AAM threads these days.
It's difficult to reassure somebody in this position but my understanding is that if my friend makes repayments of c. €1K - even if BoI don't engage and offer medium/long term restructuring - then it would be very unlikely for them to be able to force a sale or repossess.
But BoI are doing exactly that by rewarding those in arrears with a lower warehouse rate than those who are not in arrears!
Not that I am suggesting that any sort of strategic default by deliberately missing repayments is a good idea either.
Can you clarify what you would suggest to them here?
Don't restrict 2.5% warehoused rate to only those in arrears?
Don't offer a lower rate on the warehoused portion to anybody?
Something else?