PTSB 'not in a position' to cut mortgage rates

epicaricacy said:
Andy, Sarenco, Brendan et al.

The night the Irish banks required a bailout, they effectively signed a Faustian Pact - whereby, 'political interference' became inevitable. The mismanagement of the banks by their own senior management coupled with light touch regulation resulted in the mess that has plunged the country into the crisis from which it has yet to emerge. The idea that the situation would somehow magically normalise if banks could move more rapidly to repossess distressed properties is at best a facile summation. After all, the majority of these properties are in negative equity and repossessing them will merely crystallise billions of euros of losses on behalf of the banks. How exactly will the crystallisation of billions of euros in bank losses result in the SVRs being reduced?
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Huh? not all the DPD>90 days are in negative equity. The Bacon Report (2012) below, cites Honohan's estimate that approx 5% of those in arrears (at that time) were in negative equity - these represented 7% of total outstanding debt.
https://namawinelake.files.wordpress.com/2012/06/peterbaconreportjune2012.pdf
[broken link removed]

How will it help reduce Bank costs? 1) it will reduce administration costs, 2) reduce drawn-out legal costs, 3) free up capital (Irish Banks capital is stored in low yielding bonds), 4) allow the Bank's purge their balance sheets which will allow credit rating improvement (lowering funding costs).
 
Gerry Canning said:
I hear you and accept my (professional) knowledge of what Market Rates are is a laymans version.
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Irish Bank funds are (as I have read) significantly higher than N Ire,Uk ,Dutch rate, therefore it is reasonable to pass those (market) rates on, that is fair.
But from what I read the difference is widely higher than can be justified.
If I can have explained to me that the difference can be explained in large part by the rates Banks are charged in ROI for their mortgage,then I will readily accept that.
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{home at risk clause} thus fair has evidently been shown to be just dressing, and up to now ,that is a fact.
The SVR clause is not {just dressing}
What it was was a clear commitment and understood by lender and borrower to mean Mortgage Rates would largely move with Market Rates.
If as you tell me what I call Market Rates have moved largely in a fair trajectory then the SVR campaigners are doomed.
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Did I not hear most Banks use arrears/tracker rates as the main reason , not that their funding rates caused the high SVR rates?
If so Banks still need to explain.
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I can't really make head nor tail of much of your post.

However, you make a good point - on the link between SVR's and funding costs versus trackers & arrears. Off the top of my head, that's probably closer to the point - I'll have to think about that.

I note that the IT article below intimated that Honohan, in his report to Noonan in the last few days, noted that the Irish Bank's weren't making excessive profits.
http://www.irishtimes.com/news/irel...ers-for-variable-mortgage-rate-cuts-1.2211566

Personally, I don't think the SVR campaigners are doomed - I think they may just have to wait for the other issues to be ironed out first. Sadly there is no political will to deal with most of these issues. After all, an adjustment in the SVR would only largely benefit those "struggling" with their mortgage and not the media darlings - defaulters, potentially homeless. As such there's little political capital from helping those who can actually get by but who can't really enjoy life as much as they could reasonably be expected to.
 
Andy 836.

I understand the sense in your points 1 &2&4.

On point 3 ;

I had understood we had funded Banks losses , is this Capital stewing in low yielding bonds when it properly could or should be used to wash out the worst of mortgage arrears?

If so, you are 4 points up !
 
Andy

I wasn't aware that 95 percent of people in arrears greater than 90 days in 2012 were in positive equity.
 
Gerry Canning said:
Andy 836.

I understand the sense in your points 1 &2&4.

On point 3 ;

I had understood we had funded Banks losses , is this Capital stewing in low yielding bonds when it properly could or should be used to wash out the worst of mortgage arrears?

If so, you are 4 points up !
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Take AIB for example (reviewing their 2014 accounts). It uses a 50% fall from peak prices when calculating specific provisions on its mortgage book (49% fall in Dublin & 51% fall outside Dublin). They note this compares with a 38% fall from peak in the CSO index. The assumption is, this gap (i.e. over provision) will be realized when the losses are crystallized, and can then be used to either (i) reduce the capital base through dividends and thereby lower the base on which the Bank's return is calculated against, or (ii) if they chose not to reduce these excess reserves, they could use the spare capital for new lending at higher yields than the capital, as deployed currently, is generating.
 
epicaricacy said:
Andy

I wasn't aware that 95 percent of people in arrears greater than 90 days in 2012 were in positive equity.
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I would've expected it to be higher too (I do expect it to be higher now), but I was responding to your general comment that the bulk of arrears are in NE.

If you want to provide a link to a credible source, which supports your comment below, please do.

"After all, the majority of these properties are in negative equity "
 
Andy

I'm afraid I don't have one. Is there a more contemporaneous breakdown available than the Bacon Report? Sarenco writes that those percentages relate to end 2010?
 
[broken link removed]

Here's a research paper published by the Central Bank in 2014 that is based on data from June 2012 (which, with the benefit of hindsight, was when property prices troughed).

The paper indicates that 57% of distressed borrowers at that time were in positive equity. I must confess that I'm surprised at that.

Another interesting fact in the paper is that 75% of cases of distressed borrowers involved households where the head was in employment.
 
epicaricacy said:
Very interesting and surprising findings.
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Agreed but I suspect that the bulk of those in positive equity have successfully renegotiated the terms of their loans at this stage. I would guess that that the majority of the 38,000 accounts in arrears of two years or more are unsustainable and repossession will be the inevitable outcome.
 
Brendan Burgess said:
Looks like there is going to be a serious confrontation

I will refuse Noonan's calls for cheaper mortgages - PTSB boss

Asked directly whether he would refuse a request from Finance Minister Michael Noonan, the bank chief executive replied; "Yes; but not bluntly." He added that he'd tell Mr Noonan that he'd "prefer if you didn't ask me questions about the running of my organisation."

He also told TDs and senators that new customers may get cheaper mortgages than existing customers because the markets regard the new borrowers as a lower risk. Questioned about whether Permanent TSB could lose good customers who pay their mortgages to a cheaper competitor, Mr Masding said "we are spending a lot of time reflecting on this issue" and said the bank was "developing a strategy".
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How dare PTSBs CEO state that "he'd "prefer if you didn't ask me questions about the running of my organisation.". HOW DARE HE!!!!

He is equating himself and his organisation to a private enterprise , one that is capbale of standing on its own two feet, and one that has to live or die by its own business decisions.

HOW DARE HE!!!! His entire sector was bailed out by the tax payer multiple times since 2008. I dont just mean the massive payouts and bond holder bailouts, which of course are colossal,
but I also mean the entire shaping of government policies relating to everything since 2008 has been based around their goal to "get the banks back on track".
The entire economy is literally bending over backwards to ensure they return to a healthy status. And this is because they made poor business decisions, and launched poor products (i.e. tracker mortages) ten years ago.

How dare he now turn around and say, please dontinterfere with the running of my business.... Arrrgrgggghhh!!!!!!! I think I need to lie down for a bit ;)




 
Mr Masding has been appointed to turn around a deeply challenged entity, a significant portion of which we as taxpayers own. I welcome the fact he would prefer to avoid political interference so that they could start to generate a return for the taxpayers. According to the recent Central Bank Report on interest rates, PTSB interest margins are already too low. Its a simple equation either PTSB earn a viable return and repay taxpayer monies, or they operate a state subsidised loss making operation and we as tax payers suffer the losses. I know which option, I prefer. I don't think he has anything to be ashamed of, he's there to clean up the mess, not wallow in it to the politicians tune.
 
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