Brendan Burgess
Founder
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I would not use the phase 'dont deserve protection' but rather don't need it ! If they can switch, then they are not trapped and at the mercy of the lender the way others areThe argument appears to be that those who can switch, should do so. If they don't, then they don't deserve protection
I 100% agree here - mainly because I am one of those. That said, do these people require legal protection. Maybe what is needed is to remove/dramatically reduce the 'claw-back' period for any incentives given and that way they have to remain competitive to keep their customer base. Lets say its a maximum of 6 months for example.But I have some sympathy for them as I don't like seeing lenders exploiting the long and complicated switching process.
I actually believe switches need competition, and if meaningful competition existed switchers would just need initiativeBut even switchers need protection. The best a rate tart can get is 3.1% which is still around 1.5% ahead of what they would be paying elsewhere in Europe.
Ultimately has to be based on the french model proposed a good while back by @Sarenco at a 25% or 33% risk premium on the new business/average business rates. If the central bank is so keen to use average rates, I would suggest using this alsohow would you design a system to do that?
Ultimately all, although I think some need to appreciate that they may have to pay a further 'sub-prime' premium. There is a fundamental difference between someone who is in negative equity and performing, and someone who is not performing.Which of the above would need protection, which wouldn't ?
Obviously an interest rate cap to avoid them being exploited. There may be discussion around frequency of rate increases, given these people are ultimately more 'trapped' than renters since they cannot move either property or provider !And also should clarify what you mean by "protection" - is it an interest rate cap, or other thing as well?
Would only help some customers - i.e. those with lower LTV'sOblige lenders to offer existing customers the same deals as new customers
Plenty of lenders in the market who are still operating have excessive mortgage rates, and people also need protection from themGive the Central Bank the power to control mortgage rates for lenders who are no longer open to new business
This is the best model I feel, but we should use the average rate rather than the new business rate ! The central bank likes to use this figure, so I think we should too3) The Relative Rate Option - Set the maximum rate at no more than [33%] above the average rate [for new business]
But if competition does not appear in say 18 months, revisit that area again with a second bill. This would surely encourage the regulator to encourage competition in the area
If the central bank is so keen to use average rates, I would suggest using this also
Absolutely - but this particular discussion was to protect those who are most vulenerable, not lower the mortgage rates overall.I have given my overall views on this model in this post. The main flaw is that it simply does not work in a market where there is a cartel. If lenders agree to keep rates high as they are doing at present, they can still charge what they like. It would only protect against one lender suddenly doubling the rates, but would not benefit the majority of customers, all of whom are being overcharged at present.
The main flaw is that it simply does not work in a market where there is a cartel. If lenders agree to keep rates high as they are doing at present, they can still charge what they like.
I had assumed that the French model was along the lines that if a 90% mortgage had an average rate of 3%,then the maximum rate for a 90% mortgage was 3.75%. It hadn't occurred to me that the rate charged for a 90% mortgage would be determined in part by the rate charged for a 50% mortgage.
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