Prime Time programme on the SVR

I see Gregory Connor of Maynooth Uni is saying that the lack of repossessions in this country is adding 1% to the SVR rate.
So people on SVR's are partly subsiding their brethern who aren't paying their mortgages for various reasons over a number of years and growing

Naturally enough, Ross Maguire didn't see the lack of repossessions as being much of a factor. He's blaming the trackers
 
The primary reason is lack of competition and the need for the banks to return to profitability. The only way that they can do this is to exploit those whom they can exploit, the SVR holders.

There is no doubt that strategic defaulters are costing the banks money and resulting in a higher interest rate for those who are paying.

The banks are right to charge a higher interest rate for riskier mortgages e.g. 90% LTV. But LTVs <75% should not be charged an extra 1% for default.
 
Is there any campaign for Eddie Stowe's cause? I've been looking on social media but there does't seem to be any.
 
Brendan Burgess said:
The banks are right to charge a higher interest rate for riskier mortgages e.g. 90% LTV. But LTVs <75% should not be charged an extra 1% for default.
Click to expand...

Maybe I'm missing something here.

-The Banks had/have huge holes in their BS and have been making big losses for the past 6 or so years. As a result they've charged a premium to make profits, even the Govt owned banks (some would say they did so with tacit approval of the Govt who didn't want to pump any more capital into them)
-They have a huge amount of mortgages in default over a long number of years (for various reasons) that they cannot move on because of the famine, the Brits, etc.....!!!
-They have a large number of trackers that they were/are making losses on?
-The riskier mortgages as mentioned above (over 90% LTV) which aren't in default would not make up a large enough number on which to charge a higher SVR and make big profits, thereby allowing the lower LTV SVR's to be priced at a level comparable to European banks
-Everything in this country is more expensive than our European counterparts. I read recently that we have the most expensive electricity in Europe

I'm not surprised that the SVR is so high. I'm not surprised that there's so little competition given the few players that are now left on the scene and the familiarity they have with each other going back over the decades.
 
Hi Delboy

Let's say that my local Spar shop has a monopoly. It entered into a terrible lease at the top of the market and is paying rent way above the market. It has also long standing employees with huge salaries. So it has to charge double the price of everything to make a profit.

That would not last long. Someone else would open a shop in the neighbourhood and prices would fall. The current customers would not be forced to pay for Spar's errors in the past.

The lenders are charging around 1.8% above what they charge in the North and in the Eurozone for 75% LTV mortgages. The banks in the Eurozone and the North are profitable at this much lower rate. Competition should bring these rates down. People who are low risk and who are paying their mortgages should not be paying for the past errors of the banks.

I do agree that high LTV mortgages should be far more expensive in Ireland because we don't allow any effective sanction for those who can't or who won't pay their mortgages.
 
Brendan

I don't disagree with your campaign and I'm sure it will have some level of success, even if I feel there's a mood already out there amongst the banks to lower their rates...especially with the stress tests done.

Irish banks are charging higher than their European counterparts because they are in a country that had a colossal crash, recently exited from a Troika rescue package and the banks are also suffering under the circumstances I outlined above...particularly large numbers of defaults and lots of trackers.
I don't know why anyone is surprised that the banks are fleecing their customers. If the SVR's go to the European standard, well then the banks will load it on to business customers or current account fees....I don't recall reading any recent annual report from the banks that showed they were making super profits as a whole! It's a lot easier to open a shop v's setting up a new bank- if the profits are so enticing, where are the European banks on our high streets?

Also remember, the Govt want to fatten the goose before they try and sell it next year (AIB, 15% of BoI...) ahead of a general election.
 
Delboy; As usual I find your comments interesting.

1. If Banks added1% to cover our {benign} non-repo culture ,I could maybe accept that extra % as a bona fide market realisation.The excess they are charging is unconscionable.
2.Banks {suffering} from lots of trackers. Are they? surely trackers follow Banks cost of funds so where is the loss to Banks?
3. If SVR go to 1% over normal EU costs to cover Irish quirks I do not see Banks need to fleece other customers. By implication then if your neighbour does you ,you can then
rob from next neighbour.

4.European Banks are not in our High Street cause most of them are at best a bit solvent ! ie no funds to move here.
5.Why let Government sell AIB when AIB gets into profit.Surely keep it in our hands.
 
Gerry

1. I'm not sure where this 1% premium figure to cover the cost of defaulting mortgages is coming from. Greg Connor mentioned it last night but is it based on any real calculations?
2. I'm no banking guru but I have read and heard plenty of 'experts' say that the trackers are loss making for the banks. I really don't know if thats the case
3. Banks make profits. Thats the way of the world we live in. Even by charging the high SVR's, I'm not seeing any super profits currently being made
4. Are European banks all or mostly struggling? Surely some of them could see the great opportunities in Ireland to profit and jump in.!
Or perhaps they see a mortgage market where all the risks are borne by the banks and where evictions are nigh on impossible, even in the likes of Dalkey!
5. I've not saying I wish to see AIB get sold off, but I believe that will be the case next year...especially with an election coming up.
But I will say that I don't believe Govt's should own or run banks....political interference is just too tempting. Witness the pressure that the Central Bank is coming under the past few weeks since it proposed the 20% deposit rules (not a great example as it's a CB, not a retail bank...but you can get what I'm saying)!!!
 
Delboy; As per your input.

1. I accepted the 1% to give the Banks good cover on our attitude to defaults,and to seen to be fair.Like you I ain,t sure where the 1% comes from. What I am sure of is 1% is a lot of funds .
2. There have been threads here querying if trackers are loss making. The way I see it , the big costs are in setting up mortgage, thereafter it follows tracker rates so Mr Bank always gets his cut.
3.If Irish bank gets an excess 1.5% on k200 mortgage that means Mr Bank gets 3,000 per year per customer over a fair rate. Sounds like usury to mise!
4. I contend most European Banks are not healthy nuff,nor is Ire big nuff to come into.
5. I really hope Government do not sell off AIB. If I have learned anything it is that Ireland cannot leave Banking to the Market.So when next crash comes we have a modicum of control.
 
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Is there any other country in Europe where it is so difficult to repossess a BTL or Home. There is no appetite for making it easier in this country for repossessing a property. It goes on too long and is so expensive between legal, receivers and auctioneers costs. Taking 5, 6 and 7 years to repossess a property is ridiculous.
We want it every way in this country. The no repossession lobby. The low mortgage rate lobby.
I have said this before that there are costs and consequences for actions and inactions. We need to grow up as a country.
 
Hi Dermot

I heard Ross Maguire on Sean O'Rourke this morning talking about the way New Beginning jammed up the repossession system in the courts.

And then last night, he was complaining about the high mortgage rates.

He does not see the connection.

I see the connection, but I don't think it should affect low LTV mortgages.

And I have been consistent over the years in saying that people with unsustainable mortgages should lose their homes. And part of the reasoning for this is that it's in the interest of all the other borrowers who do pay their mortgage, often with a great struggle.

Brendan
 
HI Delboy

That should be "Why are high LTV mortgage rates so high in Ireland" .

This does not explain why people with 50% LTV are paying 4.65%


Brendan
 
Is it not to do with mass....there's simply not enough mortgages at more than 75% LtV on which a premium would give the banks the desired outcome
 
Brendan Burgess said:
Hi Dermot

I heard Ross Maguire on Sean O'Rourke this morning talking about the way New Beginning jammed up the repossession system in the courts.

And then last night, he was complaining about the high mortgage rates.

He does not see the connection.

I see the connection, but I don't think it should affect low LTV mortgages.

And I have been consistent over the years in saying that people with unsustainable mortgages should lose their homes. And part of the reasoning for this is that it's in the interest of all the other borrowers who do pay their mortgage, often with a great struggle.

Brendan
Click to expand...

Brendan. I admire what you are trying to do and agree with it but for the future there needs to be a loosening up of the path to repossession.
There is a link between the problem of repossession and high SVR rates/proposed higher deposits for purchase.
This link will not go away until there is a change in the repossession situation. The change is very unlikely to occur anyway soon as it will be seen to be unpopular no matter how well the argument is explained.
The Banks will use the current repossession argument to support their imposition of high SVR rates.
I came from a time of high deposit rates to purchase my house at an initial rate of 10% later rising to over 19% and seriously struggled to make repayments but made them just the same.
I made mistakes in purchasing property but paid my way totally.
I like a lot of other people are paying their way but find it difficult to swallow the pill of paying for others who do not want to pay or who want to stay in a home that is in a good address but unaffordable.
I see people who could afford to pay for a lesser house but will not move from the grand house that they currently are paying nothing back on for the last 4 to 5 years.
I am no supporter of the Banks but they have to make a profit in order to continue but we have to reconsider the rules on repossession in order to get lower rates for the future.
There is a very poor chance of new entrants to the mortgage market when the repossession problem that we have experienced over the last 6 or 7 years.
No new entrants equals no competition equals high mortgage rates.
 
The arguements made above are broadly identfying the main reasons why mortgage rates are higher here than in Europe. However, as per BB's comment the "broad brush" approach is unlikely to create a response from the banks. Realistically there is a very good rationale to provide a rerduced rate mortgage for those who meet a low risk criteria. Essentially low LTV is the main common risk factor for this type of product. Low LTI could be also put forward, but unfortunately this does not account for those with external loans which are not factored into this ratio.
I noted in BB's post on the Ritchie Boucher interview with the Dail Committee that he cited Bank cost of funds as being a significant factor in mortgage pricing. I'm not sure whether he made any comparison with BoI's Bond funding as opposed to other European banks!! I.e. If German banks are borrwoing funds at a significantly lower price than Irish banks then this is a legitimate issue. However it would not explain why KBC are charging equally high SVR's as their cost of funds would be based on the Belgian parent!! It's a strange one :confused:
 
Hi all firstly well done Brendan in highlighting what is a serious problem and reading the comments above there are arguments on each side, however I would pose the following;
did anyone in any of the lenders stop to think how many mortgages would not be in arrears if the interest rates were at the correct levels I believe there would be a dramatic improvement in the graph above, it appears to me that because of the increasing rate customers who have struggled to pay are being penalised twice for attempting to keep up with their repayments. Take the example of warehousing this is simply another way of cutting the interest rate but by doing it through the 'warehouse' scheme it avoids having to make it available to all who are keeping up with their payments. I disagree that there is not room for a cut of a substantial nature right now as is shown by what some of the very same lenders are charging in other jurisdictions. Also check out loan rate in Greece and you may start to realise why the figure for Ireland is so high. It cannot be fair that our lenders can avail of cheap capital and time in order to recover but then the very same lenders apply the very opposite to their customers. Just my thoughts and can I repeat again BANKS ARE NOT LOSING MONEY ON TRACKERS just not making enough profit quickly enough by their own calcs Padraic
 
Were a lot of the mortgages that are now in trouble not Tracker. From what I read and from my own knowledge we had a much higher % of mortgages than the normal on the Continent.

I am aware of quite a number of people with trackers who are in trouble. From what I know of these they were bought with 95% finance at crazy prices
 
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