Discussion: Should customers be let out of fixed rate mortgages?

[Bronte]

Re: Extrication from Fixed rate mortgage?

I usually hold the opinion that if you enter into a contract with your eyes open, you must deal with the consequences if it doesn't go your way.

But on this issue, I feel there is some merit in a proposal for a once-off amnesty where owner-occupier mortgage-holders get a brief "window" of time to break out of a fixed rate entered into prior to October 2008 without penalty.

I agree wholeheartedly with this option as a 'once-off' option. And like you I think people who signed on the dotted line of a fixed rate ought to have known what they were getting into. BUT the banks, the bankers, the regulators and the developers are all getting off scott free and the tax payers are paying and will continue to pay for their mess so a once off option, to give something back to ordinary householders would be the right thing to do.

 

[Kine]

Re: Extrication from Fixed rate mortgage?

In Brian Lenihan's Budget speech, he said "The Government has decided that from the 1st of May, Mortgage Interest Relief for principal private residences should only be available for the first seven tax years of the mortgage. I believe this move is justified given the significant recent reduction in interest rates and in house prices."

He is using the rate decreases as a justification for a reduction in TRS, but those on a fixed rate don't benefit from such decreases.

Very valid point, I listened to the budget the other day and thought the exact same thing. As I mentioned earlier, I'm on a fixed, but in a few months time (assuming interest rates have remained the same....they can always go up ) my mortgage will drop by c.€600 when I come off! I'd be able to stimualte the economy with that much extra cash!!

 

[NorfBank]

Re: Extrication from Fixed rate mortgage?

How would fixed rate holders feel if the lenders postponed the fixed rate penalty?

You would be put on the variable rate now but agree to pay the penalty either at the end of the term or when you sell your property?

Maybe as a condition you would have to put €x per month into a savings account with the lender until there was enough to pay the penalty?

The penalty could be index linked to keep the banks happy.

The details would need to be ironed out but it would give some breathing space to hard up borrowers at the present time.

Opinions please..

 

[LDFerguson]

Re: Extrication from Fixed rate mortgage?

How would fixed rate holders feel if the lenders postponed the fixed rate penalty?

It's an interesting idea, but in many cases, doesn't the penalty equate roughly to the savings made?

 

[kopkidda]

Re: Extrication from Fixed rate mortgage?

I think LDFerguson has made an excellent point above,is there anyway that we can air theses points to the parties concerned?

 

[NorfBank]

Re: Extrication from Fixed rate mortgage?

There still will be a penalty to be paid, I'm don't think the banks will agree to a total amnesty.
It just postpones having to pay it until the economy (hopefully) turns.

Say the penalty is €15k, 30 year mortgage. That equates to about €40 per month that the customer would have to put in the savings account until the end of the mortgage.

 

[kopkidda]

Re: Extrication from Fixed rate mortgage?

There still will be a penalty to be paid, I'm don't think the banks will agree to a total amnesty.
It just postpones having to pay it until the economy (hopefully) turns.

Say the penalty is €15k, 30 year mortgage. That equates to about €40 per month that the customer would have to put in the savings account until the end of the mortgage.

Interesting point,the banks are getting let off left right and centre,surely its time for the irish government to give us tax payers a little bit back.I know loads of people on fixed rates and i can tell you that it would stimulate the economy if their was some sort of an amnesty.

But the question is,how long is the variable rate going to stay as low as it is?

 

[DerKaiser]

Re: Extrication from Fixed rate mortgage?

I usually hold the opinion that if you enter into a contract with your eyes open, you must deal with the consequences if it doesn't go your way.

But on this issue, I feel there is some merit in a proposal for a once-off amnesty where owner-occupier mortgage-holders get a brief "window" of time to break out of a fixed rate entered into prior to October 2008 without penalty.

In Brian Lenihan's Budget speech, he said "The Government has decided that from the 1st of May, Mortgage Interest Relief for principal private residences should only be available for the first seven tax years of the mortgage. I believe this move is justified given the significant recent reduction in interest rates and in house prices."

He is using the rate decreases as a justification for a reduction in TRS, but those on a fixed rate don't benefit from such decreases.

The ECB rate cuts were designed to stimulate the economy, but this aim will be diluted by all those on fixed rates.

As has been said before, these are unprecedented times - perhaps there is scope for one more unprecedented action?

It is very likely that we will end up owning the banks. If we allow everyone on a fixed rate to break out of it, it is effectively a transfer of wealth from those on fixed rate mortgages to those that are not.

The majority of people on fixed rates can afford to pay and should be held to contract. The focus should be on finding a solution only for those who are in genuine difficulty and this measure would not achieve this

 

[Berbatov]

Re: Extrication from Fixed rate mortgage?

all fixed interest rate holders misery will be compounded even more at the start of next month with JCT more than likely cutting rates by a further 0.25% bringing the ECB to 1%.

 

[Kate10]

Re: Extrication from Fixed rate mortgage?

Why do people keep saying things like "the banks are getting away with it" etc etc? Clearly they did not get away with anything. They are barely surviving. What is a bank anyway? Ultimately its the banks shareholders who pay the price for a failing bank, and if the banks fail totally, then each and every one of us with suffer. Developers don't appear to be getting away with anything. Most have lost virtually everything. NAMA is going to buy their debts, seize and sell the security for whatever it can get for it, and developers will still owe the balance.

 

[LDFerguson]

Re: Extrication from Fixed rate mortgage?

NAMA is going to buy their debts, seize and sell the security for whatever it can get for it, and developers will still owe the balance.

Yes but it appears that NAMA will be buying the debts for less than actual value. So the banks will have to write down the value of these debts to some degree.

Just a hunch, but I would expect that the cost to the banks of allowing fixed rate mortgage holders a limited period to break out would be less than the write-down on developer loans. Bear in mind that many people would turn down the option for a variety of reasons.

DerKaiser - policing such a scheme so that only those in difficulty would qualify would be very labour intensive. Opening it to all would get around that - those in difficulty would jump at it. Many of those who aren't might well stick with their fixed rate. Bear in mind that ECB rates will almost certainly go back up - the only question is when. So many will hang on to their fixed rates for safety.

 

[Bronte]

Re: Extrication from Fixed rate mortgage?

Developers don't appear to be getting away with anything. Most have lost virtually everything.

I didn't see any of them living in council housing built by themselves nor down the dole office. Most of them will have ringfenced their PPR etc so they can't really be touched. Ditto for the bankers as they swan off to their yachts in Marbella and their gross pensions.

 

[DerKaiser]

Re: Extrication from Fixed rate mortgage?

DerKaiser - policing such a scheme so that only those in difficulty would qualify would be very labour intensive. Opening it to all would get around that - those in difficulty would jump at it. Many of those who aren't might well stick with their fixed rate. Bear in mind that ECB rates will almost certainly go back up - the only question is when. So many will hang on to their fixed rates for safety.

No one will hang on to their existing fixed rate as they could switch to the current fixed rate.

I don't know the figures, but say there's 100,000 people on fixed rate mortgages with an average break out fee of €10,000. That's a €1bn pardon!

I don't think as a society we can in all conscience allow this to happen.

The banks already deal with people in arrears on their mortgages and try reschedule payments. Let them continue to do this, why hand out a free €10,000 gift to everyone on a fixed rate regardless of their personal circumstances?

 

[kopkidda]

Re: Extrication from Fixed rate mortgage?

No one will hang on to their existing fixed rate as they could switch to the current fixed rate.

I don't know the figures, but say there's 100,000 people on fixed rate mortgages with an average break out fee of €10,000. That's a €1bn pardon!

I don't think as a society we can in all conscience allow this to happen.

The banks already deal with people in arrears on their mortgages and try reschedule payments. Let them continue to do this, why hand out a free €10,000 gift to everyone on a fixed rate regardless of their personal circumstances?

Would this 1bn pardon as you put it not help to get some liquidity back intot he economy,i think it would!

 

[Paulk]

Re: Extrication from Fixed rate mortgage?

"In Brian Lenihan's Budget speech, he said "The Government has decided that from the 1st of May, Mortgage Interest Relief for principal private residences should only be available for the first seven tax years of the mortgage. I believe this move is justified given the significant recent reduction in interest rates and in house prices."

He is using the rate decreases as a justification for a reduction in TRS, but those on a fixed rate don't benefit from such decreases."

That's an excellent point LDFerguson. The Government is so hypocritical by only applying rate cuts to the equation when it suits them.

Anyway, after the elections in June, it will be clear that Fianna Fail won't be in power for much longer. The fact that people on low salaries are now paying for years of mismanagement and deception by bankers and politicians is abysmal. We are basically bailing out criminals.

 

[DerKaiser]

Re: Extrication from Fixed rate mortgage?

Would this 1bn pardon as you put it not help to get some liquidity back intot he economy,i think it would!

It would aright.

You could even look at it in terms of giving back a large chunk of the 2% extra health levy imposed in 2 million workers in the budget to the 100,000 fixed rate mortgage holders who are surely more deserving of the money.....

 

[kopkidda]

Re: Extrication from Fixed rate mortgage?

It would aright.

You could even look at it in terms of giving back a large chunk of the 2% extra health levy imposed in 2 million workers in the budget to the 100,000 fixed rate mortgage holders who are surely more deserving of the money.....

Now your making sense.

 

[LDFerguson]

Re: Extrication from Fixed rate mortgage?

No one will hang on to their existing fixed rate as they could switch to the current fixed rate.

I don't know the figures, but say there's 100,000 people on fixed rate mortgages with an average break out fee of €10,000. That's a €1bn pardon!

I don't think as a society we can in all conscience allow this to happen.

The banks already deal with people in arrears on their mortgages and try reschedule payments. Let them continue to do this, why hand out a free €10,000 gift to everyone on a fixed rate regardless of their personal circumstances?

Okay - let's modify the plan - rules in the Amnesty that preclude you from availing of a fixed rate from the same bank for a specified period of time.

Your other arguments seem to be based on the presumption that the banks will all be nationalised. How would you feel about this suggestion if this does not transpire, or if it is implemented prior to any such nationalisation?

 

[MentalNote]

Re: Extrication from Fixed rate mortgage?

They should force the banks to let everyone on a fixed rate mover to variable. Then they should force the banks to force everyone on a tracker rate on to standard variable too!

Sense: this post makes none!

 

[GreenQueen]

Re: Extrication from Fixed rate mortgage?

Good luck in getting out of your fixed rate - I do not wish them on anyone and for myself would have only opted for such an arrangement if I was worried about not being able to absorb significant rate increases (I stress- tested rate change of over 500 basis points as I felt that the rate at the time was extremely low). I have no particular interest in whatever you wish to crow about when you do but if you have sensible suggestions and approaches it may help others who also wish to tackle the cross and bring their costs into line with current variable and tracker rates, I am sure that would be both constructive and welcome.

I was one of those who did fix after stress testing an increase in mortgage rates against our income. I calculated that an increase in mortgage rates would put us under too much pressure financially so fixed nearly 2 years ago for 5 years.

We're now in a position where we are locked into a fixed rate mortgage and we still have an increased amount to pay thanks to the introduction of a time limit on TRS on the interest portion of our mortgage. The limiting of the TRS wasn't something that I could forsee 2 years ago and we now fail any sort of stress test because we only have 1 income as opposed to 2.

There is a case to be made for an amnesty for fixed rate primary household owners to be allowed to break from their fixed rate mortgages in the light of the reduction in TRS. Given the increased amount of unemployed the state will be put under further pressure to assist benefit claimants by way of Supplementary Welfare Allowance for mortgage payments. If fixed rate holders were allowed to break then the amount of SWA payable by the state would be reduced, thus decreasing financial pressure on the state.

Another factor which has been missed is that the Medical Card is means tested. Part of the means testing process takes into account your monthly mortgage repayments. If (in general) mortgage repayments are reduced then the amount of families eligible for the Medical Card is reduced, also decreasing the burden on the state.