Brendan Burgess
Founder
- Messages
- 52,118
Whatever the regime I think it should include some cap on rates (perhaps ECB + X) so that lenders who exit the market can't just hike their rates (like Danske did) and screw those not in a position to switch.3) They would be free to raise or reduce the SVR at any time, but must do so for all customers
Whatever the regime I think it should include some cap on rates (perhaps ECB + X) so that lenders who exit the market can't just hike their rates (like Danske did) and screw those not in a position to switch.
Lenders who are closed to new business - their rates would still need to be controlled - probably based on the average SVR which would now be easily determined
I would like this to go a step further, and benchmark the SVR on the floating average of outstanding mortgages (or new mortgages) issued by all banks in the previous 3 months. Make the central bank figures very relevant to everyone ! This way Mary could see AIB are offering 0.75% discount and KBC are offering 0.5% discount - means AIB will be 0.25% cheaper for the duration of the mortgage.
Surely the obvious problem with this proposal is that there is nothing to stop a lender simply launching a parallel product with a different margin over their SVR based on some arbitrary criteria. That's what Ulster did last year.
The fact that lenders are differentiating their mortgage products is something that should be welcomed - not frustrated.
Lenders must offer existing customers any deal on offer to new customers.
To the best of my knowledge, any existing UB customer can apply for any product on offer to new customers? Is that not the case?
This is a theoretical argument and product differentiation beyond a certain point is bad for consumers. Look at health insurance to prove the point.
Mortgages should be a simple product and lenders should not be allowed to introduced gimmicks which complicate it and make it even more difficult for consumers to compare.
The fact that lenders are differentiating their mortgage products is something that should be welcomed - not frustrated.
You are confusing two separate issues here. Product differentiation and customer discrimination. OK, allow product differentiation as long as they offer the new differentiated products to existing customers.
Let's see if I understand what you are proposing?
The Central Bank works out the average mortgage rate for new 80% LTV business in the last quarter - say 3.5%.
My mortgage with AIB would say Market Rate -0.25%. Your mortgage with KBC would say Market Rate.
The market is very often irrational so, if this is what you are proposing, it couldn't work.
At the moment, all the banks are charging about 1.5% more than the Eurozone rate, so it would not help them. (It could help protect someone with a dead bank.)
I think it would be worth trying out to see if it makes competition work to bring down rates and prevents the tricks and gimmicks lenders use to mislead borrowers.
Unfortunately, in the end, I think it will be necessary to have some form of legislative control of mortgage rates. But I would try to make competition work first.
AIB might go out of business anyway if it competes at that level. Is this not what got us into the whole mess in the first place.He reduces the the rate from 4% to 1.8%. A bit lower than where it should be but he wants to buy market share.
AIB then has to cut the rates to 1.3% and would go out of business.
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