Extending the new mortgage code of conduct TO ABOLISH BREAK FUNDING FEES

[fuzzyduc]

Today fm News
Call for moratorium on house repossessions
6/2/2009 15:27 Call for moratorium on house repossessions The government is being called on to extend the new mortgage code of conduct to include a moratorium on house repossessions during the recession. The code of practice which will be introduced as part of the recapitalisation of AIB and Bank of Ireland is designed to protect homeowners facing repayment difficulties. The Taoiseach Brian Cowen says the code will be placed on a statutory footing if any mortgage providers fail to adhere to the new measures.

Many are saying already that these new measures don't go far enough to help those facing repossession.
Does anyone know if it mentions anything about the colossal Break Funding Fees attached to Fixed Rate Instructions?

I am in a position where my income has fallen drastically in the past 5 months, flatmate has lost her job, finances have just changed.

I am not alone here, I know there are many now with real problems meeting their higher fixed interest repayments, who would have means to meet the variable rate repayments available now.
Clearly anyone with tightened finances won't have the thousands required to break out of the choking fixed rate (last quote I got three weeks ago was €23,000 with KBC).
To loose control with mortgage repayments and risk repossession of your home, because of a blind judgment choice last September between Variable and Fixed Interest is completely incongruous.

I heard Michael McGrath FF on the radio talking about this new code for the banks. I'll definitely get in touch with someone come Monday to see is this being looked at.

Does anyone, with interest, know how to put on any pressure?

 

[MOB]

I do have sympathy. I really do. But this is not really a case of banking misconduct. And this is not a case where intervention is appropriate.

The fact is that there are many people out there on trackers of as little as ECB +0.5%. The banks are losing money on these loans.

If the banks lobbied for a get-out clause to allow them to terminate their tracker contracts, everybody would (rightly) say 'no -a deal is a deal. Honour your contract'

If interest rates had moved to 8%, OP and others who had had the 'intelligence and foresight' (for it would certainly not then be called 'blind judgment'....) to fix their rates would certainly (again, rightly) cry foul if the banks sought a get-out clause to allow them terminate the fixed-rate deals.



I concede that their might be an element of profiteering in some of the break costs being quoted. But - and this is the crucial thing - I am fairly sure that the break costs are clearly stated in the original facility letter. So I am afraid I am with the banks on this one.

I would flag one possible issue. The financial institutions have repeatedly been found to be mis-selling financial products in circumstances where the bank's interests were clearly put ahead of the customer's interest. The various 'mis-selling' scandals are a feature of life which will never go away as long as people are silly enough to expect independent advice from the vendor of a product (nobody expects that the door to door salesman of vacuum cleaners or devices for mopping the grease from soup will give a frank and candid assessment both of their product and the competitors' products. People should not expect any different from banks). So it is possible ( and I suppose time will tell) that some people will have been (or will claim to have been!) mis-sold fixed rate deals at the top of the interest rate cycle. If there is evidence of bank mis-selling, then perhaps there will be a get-out clause for such people.

 

[Blinder]

I'm with MOB on this one.
Hindsight is great, but you signed a contract to pay the fixed rate.
That contract included a clause that breakage costs would apply you wanted to break the contract before the end date.

The bank borrowed money at a certain rate so that they could lend you that money.
If all the fixed rate mortgages were to be moved to standard rate without the breakage clause being applied, then the bank makes a lose. They will then have to increase the variable rate for everyone to cover that lose.


blinder - ( who is also on a fixed rate but knows that it was my choice and does not think the bank is in the wrong)

 

[fuzzyduc]

Hi MOB and Blinder,
My overriding feeling is that I don't feel the bank was in the wrong. I understand a contract is a contract. I think at the moment the set of circumstances, leading to most peoples financial problems, is built on honest strategic choices.

However I also feel that there is no doubt the banks knew this bust was coming. There were told of the serious potential of a minor crash 2008, major crash 2009. This all happened quicker than expected.
However much I knew it in September I made a choice to go Fixed, knowing rates would drop. I fixed for the long haul so that perhaps I'd get relief to balance out the difference through the course of the fixed rate term. I do not blame the bank for my choice. But I was clearly a customer feeling the pinch of the rapid rate rises. Probably not the wisest move on their part to sell me a high fixed interest.
( I don't believe that by September last year they didn't know what their forecast was for October when rates began to drop. If they didn't, I would be wondering what these banking executives do!)

But, I don't think the Code of Practice is dealing with banking misconduct.
It seems to be only changing the rules of repossession. Changing the willingness of banks to hold off repossessing for a longer duration. Changing the willingness of he banks to work with customers to resolve repayment problems.

I understand the opposite scenario, with rates rocketing, fixed would be the better option. I think really, the banks knew the ECB would lower rates. In fairness, they might rocket after this downturn, but they knew.
I think whilst my money is going to these banks as a bail out, whilst they are having dig-outs for their bad choices, that is with top economic banking executives having made the decisions influencing their present predicament, I really feel my one inexperienced signature on that bit of damn paper that said I'd pay Fixed interest until 2013 could be looked at as a bad choice to be addressed, not one to loose my house over.
Its their bank, its my home.