What is a fair residential mortgage interest rate ?

Yes - but it's not clear that the capping mechanism mentioned applies to mortgages.
I would not have considered a mortgage to be an "easy to obtain small consumer loan" which is the focus of the presentation.
 
ClubMan said:
Yes - but it's not clear that the capping mechanism mentioned applies to mortgages.
I would not have considered a mortgage to be an "easy to obtain small consumer loan" which is the focus of the presentation.
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If you look at the first indented bullet on the penultimate slide, it states: "Interests for each quarter are calculated at 133% of the average interest rate found during the previous quarter. A cap exists for each category of credit (consumer loans below €3.000; consumer loans between €3.000 and €6.000; mortgage credit...)". The final slide gives the specific figures in relation to mortgages for Q4 2014.
 
OK - thanks. That clarifies it alright even though it still seems odd to categorise a mortgage as an "easy to obtain small consumer loan".
 
ClubMan said:
OK - thanks. That clarifies it alright even though it still seems odd to categorise a mortgage as an "easy to obtain small consumer loan".
Click to expand...

I don't think it does - the first four slides deal with changes introduced in 2010 in relation to small consumer loans, whereas the last two slides deal with the regime that has been in place since 1966 that relates to all categories of loans (including mortgages).
 
The title of the presentation is "Regulation of “easy-to-obtain” small consumer loans with a high-interest rate (France)".
I don't know many people who could consider a mortgage an "easy to obtain small consumer loan".
It's arguably generally neither easy to obtain nor small (at least in personal finance and household debt terms).
Maybe the presentation is translated from French and something was lost in the process...?
 
I think you might be getting unduly hung up with the title of the presentation, which is largely focused on the 2010 reforms.

I am attaching a comparative study on interest rate caps across the EU and refer you to the table on page 67.

[broken link removed]
 
What is a fair residential mortgage interest rate ? = 3% for 5 year 10year 15 year fixed
 
R0easoning behind this being a "fair" rate?

Manageable mortgage payments , and hedge against rate increases ,for the consumer. A hedge against mortgage arrears for the banks.
The biggest threat to this economy is a interest rate increase, and that increase or series of increases will be decided by somebody outside our economy.
Good valued fixed rates to me would seem to offer the best solution for everybody.
 
Bamocom said:
Mortgage at 5% customer cannot pay, mortgage goes into arrears, Mortgage at 3 % customer can pay , customer does not go into arrears.
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Sure why not reduce it to 1% and really hedge against mortgage arrears?

Just out of interest, where do you propose the Irish banks raise the 5, 10 or 15 year funding for your suggested 3% fixed rate?
 
In that case why not 1%, or 2% or whatever you're having yourself...?
 
Bamocom said:
Mortgage at 5% customer cannot pay, mortgage goes into arrears, Mortgage at 3 % customer can pay , customer does not go into arrears.
Click to expand...

Ok so let's say that a certain rate a loan is affordable from a borrower's perspective but is only profitable from a lender's perspective if he lends at a higher rate. A borrower may not default at the lower rate but if the lender can't make the figures work in the first place that all becomes somewhat academic.

The deal has to make sense for both parties and you can't simply say a rate is "fair" because it works for one party.
 



Presently the deal is only working for one party, the Banker, So in your own words you agree the present the state we in, does not make sense.

"In the absence of a transparent, clear and quantified policy on the part of the banks, can be seen as excuses for charging whatever the market will bear rather than being a fair application of the contract consistent with a borrower’s reasonable expectation."

Are mortgage Holders paying what the market will bear or what is a fair rate ?
 
I agree that the mortgage market is currently dysfunction and I have suggested a mechanism on numerous threads for capping mortgage rates to protect those borrowers that can't refinance their mortgages.

I was simply replying to your suggestion that a low interest rate reduced a lender's default risk. While this is undoubtably true, it's not of much use to a lender if the loan is unprofitable in the first place.
 

You can find the list of interest rate limits here.
http://www.banque-france.fr/fileadmin/statistiques/gb/base/html/tmf_mens_france_gb_usuryrates.html

Note the usury rate for variable mortgages is 4.09% suggesting an average market rate of 3.08%.
 
Thanks for the updated figures Andy - that's very useful.

I'm not sure how the French Central Bank calculates the "average effective variable rate" but the median rate on all outstanding mortgages in Ireland (according to our own Central Bank) is around 2.8% so the average effective variable rate here is probably not wildly dissimilar to the rate in France.
 
A fair rate is one that a big Business figure in Ireland might get on his/her loans from Govt guaranteed institutions....say 1.25%
 
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