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

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.

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

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"

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

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.

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

Brendan

Click to expand...

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.

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.

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.

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

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

Click to expand...

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.

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.

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

Brendan

Click to expand...

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?

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
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.

Click to expand...

The reality is BOI is charging 4.5%


That's the reality

rodger said:

The reality is BOI is charging 4.5%


That's the reality

Click to expand...

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.

And for investment mortgages BOI variable rate is 5.65%

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.

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

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 !

qwerty5 said:

Swift in political terms might mean next year.

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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 !

qwerty5 said:

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

Click to expand...

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.

BillyO said:

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

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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.

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.

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.

Click to expand...

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.

rodger said:

The reality is BOI is charging 4.5%

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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.

gnf_ireland said:

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

Click to expand...

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).