Central Bank study of switching from vulture funds

[Brendan Burgess]

The Central Bank has published a note on mortgage switching.

I have read it and it seems to state the obvious. But I wonder if I am missing something.

There is no blanket ban imposed by the retail banks on taking on customers of vulture funds. The Central Bank has been going on about this for years. No one ever said there was. If BoSI sold a performing mortgage to Pepper(?) of course that customer could switch to another lender.

Low risk customers are more likely to switch than medium and high risk customers. Well spotted Sherlock!

What might appear surprising is that about 0.025% of medium and high risk customers switch every month.
So what is that? 0.3% a year.
3 out of every 1,000 credit impaired customers switch every year.

Even 3 sounds surprising but the categorisation is based on the risk of the portfolio sold by the lender. So 5 years ago, a borrower could have been in arrears and have since recovered. Or it could be a handful of older people switching to Spry Finance who don't care about your credit rating.

In other words, the customers of vulture funds who have bad credit ratings can't switch.

Brendan

 

[CorkHome2022]

The Central Bank has published a note on mortgage switching.

I have read it and it seems to state the obvious. But I wonder if I am missing something.

View attachment 8977

There is no blanket ban imposed by the retail banks on taking on customers of vulture funds. The Central Bank has been going on about this for years. No one ever said there was. If BoSI sold a performing mortgage to Pepper(?) of course that customer could switch to another lender.

Low risk customers are more likely to switch than medium and high risk customers. Well spotted Sherlock!

What might appear surprising is that about 0.025% of medium and high risk customers switch every month.
So what is that? 0.3% a year.
3 out of every 1,000 credit impaired customers switch every year.

Even 3 sounds surprising but the categorisation is based on the risk of the portfolio sold by the lender. So 5 years ago, a borrower could have been in arrears and have since recovered. Or it could be a handful of older people switching to Spry Finance who don't care about your credit rating.

In other words, the customers of vulture funds who have bad credit ratings can't switch.

Brendan

This does not take into account how many people had to get some sort of forbearance from the Vulture Funds due to the recent high interest rate hikes , the repayments may have stayed the same but the terms had changed hence a further red flag stopping any chance of a switch to a High Street Bank . Some people are in even deeper trouble now than before they were sold to the Vultures .

 

[REDRUNNER]

This does not take into account how many people had to get some sort of forbearance from the Vulture Funds due to the recent high interest rate hikes , the repayments may have stayed the same but the terms had changed hence a further red flag stopping any chance of a switch to a High Street Bank . Some people are in even deeper trouble now than before they were sold to the Vultures .

The banks will not facilitate a switch easily, I was told by the bigger banks that I’d need in excess of €4,700 per month after the monthly mortgage payment was taken out for affordability with a young family. Never missed a payment in 18 years of the mortgage, LTV of 40%, the criteria for switching seems very high, and vultures are forcing people into insolvency or split arrangements by doubling their mortgage and in doing so trapping people from ever escaping to a main stream bank.

 

[Brendan Burgess]

the criteria for switching seems very high,

The criteria for switching are no different from the criteria for applying for a mortgage. If you had sold your home and wanted to buy a new one you would face the same issues. It has nothing to do with switching. And it has nothing to do with the fact that your mortgage is with a vulture.

 

[REDRUNNER]

Well they don’t (main stream banks) seem to take into account the equity built up over the years, if I sold my home and started from scratch I’d have a hefty deposit and wouldn’t need to borrow as much, but switching requires borrowing the balance owed. As with a new mortgage I can borrow 3.5 times my salary, the fact that I paid 3 quarters of my mortgage and have equity don’t count for much in a switch as far as I can see.