Prime Time programme on the SVR

PadKiss said:
BANKS ARE NOT LOSING MONEY ON TRACKERS just not making enough profit quickly enough by their own calcs Padraic
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If you had 1,000,000 euro would you consider handing it to someone for 400 euro a month in interest a profitable business? That's the theoretical profit a bank can make on 0.5%+ECB tracker.

The banks aren't getting all their funding at the ECB rate and the cost of running a mortgage business is not zero. Brian Hayes is over in europe still trying to offload tracker mortgages to the ECB for precisely the reason that they're loss making.

I may be wrong but as far as I remember the only reason banks thought they could make profits on trackers was because they could borrow below the ECB rate.

I'm not saying there's anything wrong with having a tracker or tracker owners need to feel any guilt that SVRs are high - but trackers have been a total disaster.
 
Hi Brendan
You get a high fixed rate approx 5.25% for 3 years and then you track 3 month Euribor or ECB plus 3% margin (importantly for the term of the loan) at least people can plan around these rates but its the dont know factor that is wrong here, why not charge 10% if there is no restriction on SVR which appears to be the logic being put forward. P
 

So screw the SVR holders!!!!!!!!!!!!!!! If trackers don't pay blame and screw the svr holders!!!!!!!!
 

The primary source of funding for retail banks are customer deposits. AIB currently pay interest at a rate of 0.05 per cent on demand deposits and actually levy charges on current accounts.

In other words, the bulk of AIB's funding is at or below the ECB base rates.

Trackers may not be particularly profitable for banks but they are not loss making. It is simply not true that tracker rates are subsidised by high SVRs.

The reason the cost of credit is so high in Ireland relative to other European jurisdictions is almost entirely down to the high level of non-performing loans (25 per cent of the Irish loan book are NPLs according to the latest World Bank statistics, in Belgium, to take one example, the percentage of NPLs is less than 4 per cent).

If we want lower mortgage rates in Ireland then we have to insist that the level of NPLs are dramatically reduced. This would require a radical change in the level of forbearance and/or loan modification currently in favour. We can't have it both ways...
 
This is not correct. Bank levels of deposits have dropped dramatically in recent years. The marginal cost of funds is well above the rate now given to depositors. Also it is mm it simply a matter of being able to take in deposits and lend those funds out directly. Banks have high liquidity requirements and this also has a cost. Some of these arguments are too simplistic and would not be reflective of how banks are funded.
 

+100. It comes down to this, even if people don't want to admit it and don't want to see other folk lose a house and possibly have to downgrade or move to a less desirable/convenient area

We want lower SVR's and so we need competition from abroad- but the foreign banks won't touch us because they'll rarely be able to get hold of the asset if the loan goes bad. You'll have some suave barristers in suits or loons with placards outside your front door with the 9pm news cameras if they do try and get a property back.

We want lower SVR's but we also want the banks to write off debts, or kick the can down the road with some mortgage to rent/warehoused mortgage etc type products.

If you want your banks to be competitive like the Europeans, then let them conduct their business like the Europeans
 
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Hi 44brendan

Could you clarify what you think is not correct in my post?

I would point out that AIB's loan to deposit ratio (which is more relevant to this discussion than the total level of deposits) at the end of Sept '14 is 98 per cent and its NIM is 1.64 per cent.

Obviously banks have costs beyond the cost of funding but even the cheapest tracker rate is set at a margin over the ECB base rate. If the margin over ECB, is, on average, 1 per cent and AIB can attract deposits at or about the ECB base rate, would you then agree that tracker rates are not subsidising SVRs?

I am not trying to suggest that trackers are particularly profitable for the banks but rather that the major reason for the high cost of credit in Ireland is the high level of NPLs.
 

AIB pay 0.5% on demand deposits, which though tiny is well above the ECB rate and not far off the cheapest tracker. So I'm not sure how the builk of AIB's funding is below ECB base rates?
 
ashambles said:
AIB pay 0.5% on demand deposits, which though tiny is well above the ECB rate and not far off the cheapest tracker. So I'm not sure how the builk of AIB's funding is below ECB base rates?
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AIB demand deposit rate is currently 0.05 percent - the same as the ECB refi rate.

Also bear in mind that a considerable proportion of deposits are held in current accounts where the interest paid by AIB is zero (in fact it's less than zero if you take fees and charges into account).
 
Ashambles,

The relevant ratio is AIB's net interest margin (NIM) - the percentage of what AIB earns on loans and other assets minus the interest paid on borrowed funds (including deposits) divided by the net current assets of AIB on which it earned income in the time period. In very simple terms, the difference between what it pays out on borrowed money and what it takes in on loans.

As at the end of Sept '14 AIB's NIM stood at 1.64 per cent. If you allow for 1 per cent for costs (including employees costs, regulatory reserves, etc.) that still leaves an ample profit margin. Again, I come back to the same point - the problem is not trackers, the problem is the level of NPLs on AIB's loan book.
 
I have been reading these threads as we are in the group of people on a SVR but with negative equity so essentially can do nothing about it at the moment. Apologies if this is a very very stupid question.

If the problem is that it is next to impossible for a bank to take possession of a house why does it matter what the LTV for the house is? Granted eventually they may get the full amount back with a low LTV but it's not any easier is it?
 
advice pls said:
question.

If the problem is that it is next to impossible for a bank to take possession of a house why does it matter what the LTV for the house is? Granted eventually they may get the full amount back with a low LTV but it's not any easier is it?
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That is essentially it.

If I have a mortgage of €100k on a property worth €300k, there is no point in me defaulting. The bank keeps on charging interest and after 4 years, they will get possession with their full loan repaid and the costs of the legal action

If you have a mortgage of €300k on a property worth €100k and you pay nothing. It will cost the bank €20k to repossess and sell the home so they lose €80k

It's far less likely that someone in positive equity will strategically default.

Brendan
 

Here's a case study in why I believe Banks have no choice but to charge high SVR's in order to cover their losses elsewhere on their loan books
http://www.irishtimes.com/news/crim...-home-of-mother-of-four-judge-rules-1.2014835
Some highlights:
-near 600k owing on this period house in a prime area of South Dublin
-difficulties between 2004 and 2008 during which time the bank granted a number of moratoria on capital and interest repayments
-no repayments at all made in the 3 years up to last year when the bank applied for a repossession, so probably safe to assume no payments made since then either
-Sheriff arrived last Sept to enforce eviction but appeal lodged to the High court which was just heard now (over 15 months later). Represented herself but lost...who pays for the High court case as they aren't cheap and the lady in question is on Social Welfare???
-She said the family had moved out and wanted nothing to do with the house anymore...but the Judge still gave her another 6 MONTHS!!!

Now there's more to this case (and the link here just gives the details of the High court case really) and various court reports over the past couple of years have outlined bits and bibs. So a google will turn that up if your interested.

But if ever you wanted to see the drama and saga that is repossessing a house in Ireland, then this is the poster boy.
More foreign banks to come to Ireland.....they'd be off their rockers
 
Delboy said:
Here's a case study in why I believe Banks have no choice but to charge high SVR's in order to cover their losses elsewhere on their loan books
...
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I'd just read the article and then came here to see if anyone had picked up on it... I can't believe a stay of 6 months would be granted where someone had moved out of the house already!
 
If this report is accurate then this really is a bizarre story. Distress being experienced on a mortgage for 10 years (10 years!) but a final 6 month stay is granted even though the mortgagor no longer lives in the property and the lady in question was not looking for and apparently does not want the relief. And people complain about the high cost of credit in Ireland. If only we had an MEP who took an interest in this issue...
 
Hi Delboy

Agreed that is a bizarre case and it does reflect the very high costs of repossessions in Ireland.

However, in this case, the house is worth more than that outstanding mortgage, so the lender will not lose.

And this is my point. I agree that high LTV mortgages should be more expensive in Ireland than in other countries because we have no effective sanction for those who won't or who can't pay their mortgages. But this lack of a sanction should not affect people with a low LTV mortgage.
 
What the Judge said.


"Mr Justice McDermott said it was a case with a "sad history" with consequences which have are profoundly significant for Ms White and her family."

There is more to it. There was a marriage breakdown. One of her kids tried to intervene when she was telling the Judge that the bank could have the house.

mf
 
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