Am I the only one annoyed by high mortgage rates in Ireland?

Brendan Burgess

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I am very annoyed by these high rates, and I don't even have an SVR mortgage.

But what astonishes me is that there isn't widespread protests about them - outside the Dáil, outside the Central Bank, outside the banks.

I am not aware of anyone complaining to their TD or to the Central Bank. I am trying to get the politicians interested, but they are not really biting.

A few journalists are interested in covering the story, but they say that there isn't much that they can do unless they have real live borrowers prepared to talk about the impact of the high SVRs on them. But neither the journalists nor I, can get anyone to talk about them.

There are 300,000 people with standard variable rate mortgages. Why are they not roaring and shouting.

We had a very effective campaign a few years ago when ptsb were charging 6% while AIB and BoI were charging 3%. That helped to bring down the ptsb rate.

Anyone want to talk to the press?
 
Am I the only one annoyed by high mortgage rates in Ireland?
Must be one of the few given the lack of interest in the topic!! (excuse the pun).
This does not seem to be a key issue with Irish borrowers. Presumably because availability of funds is their main priority. The mortgage product imay look highly profitable for the banks. However, while not being in any way a spokesman for the banking sector I might make a few relevant comments in respect of mortgage product and relevant risks:
1. Mortgage lending was historically regarded as a low risk product for the banking sector. this was completely turned on it's head as a result of the banking crisis. Losses were incurred not just due to reductions in property prices but also due to the introduction of CCMA which effectively prevented the banks from realising security held.
2. MARP rules also prevented banks from applying surcharge rates to those in arrears. I,e, higher interest rate due to higher risk loans.
3. From a commercial banking perspective the introduction of this legislation by the Government resulted in Banks carrying unsustainable loans on their books for long periods beyond what would normally be acceptable in a default situation.
4. This has resulted in a scenario where the low risk mortgage product has become a much higher risk product. High risk equals high price.
Look at the margins now being applied to commercial loans. they are broadly speaking similar to mortgages for longer term facilities. i.e. the products are similarly priced because the associated risks are similar.
There is very little sentementality associated with mortgagees in most European countries. I.e. you don't pay the loan, the bank reposesses and sells the house.
Again to be fair to banks they are commercial businesses and I don't see any great interest in competitors re-entering the Irish market. Would you blame them, giving the burning that BoSI and other foreign banks suffered?
 
44Brendan sums it up.....mortgage business in Ireland is now very risky for the Banks. If the loans don't perform, either on residential or BTL, the banks have very little come back except to extend and pretend.

No repossessions = higher risk = higher mortgage rates.

In what other country could you expect to live in an area like Dalkey and not pay your mortgage for 4 years+, and still be left in situ...with the financial institution having to go all the way to the High court!
And the looney fringe waiting in the wings to occupy the house or storm the auction if it ever gets that far!

People talk about the SVR's being high because of the amount of cheap trackers. True to an extent....but I reckon the amount of defaulting mortgages is a far bigger contributor to the high rates
 
To get a good story for the media you'd need someone who took out an SVR at say 2.2% and who are now paying 4.4%. That sort of difference would create financial stress.

But a typical SVR customer took out their mortgage at around 4% and are now paying around 4%, so sympathy and understanding in general is non-existent.

If they are in trouble it's likely due to loss of income and that loss of income is their focus rather than the 2% extra or so of profit the bank is squeezing from the mortgage.
 
Hi, No you are not alone with this concern. It is, I think that the ordinary man/woman's voice is neither listened to nor heeded if requesting a consideration (even) of a reduction in interest rate.

As a possible solution to my mortgage being made sustainable it was one consideration which I proposed, as am paying 4.58%.

In it's reply to me, there wasn't even reference to it.

Insignificant voices hold no power in Bankland.
 
I feel very strongly about this: I believe the banks have allowed me to go into arrears because they know I am then unable to switch.

So my credit rating has been affected.

I have been paying 5.7% to ICS / BOI on a buy to let.

The bank is borrowing at somewhere between 0.05% and 1%

They are raking in profits of 4.65% on my loan !!!

Thanks Brendan for raising this very important topic.

I have written to Alex White and Shane Ross.

I previously wrote to Olivia Mitchell.

Hopefully the momentum is going in favour of lower variable rates with AIB recently reducing by 0.25%

And BOI is on the cards.

Another rate reduction of 0.25% and maybe home loans would be less than 4%

What about when ECB rates go to 2%? Does that mean a hike of 2% on SVR rates?

Another issue I have with BOI is the LTV rates are only for new customers!!!
 
I am very annoyed by these high rates, and I don't even have an SVR mortgage.

But what astonishes me is that there isn't widespread protests about them - outside the Dáil, outside the Central Bank, outside the banks.


There are a number of reasons for this, some cultural and historical.

Typically, the Irish don't protest. Only 40,000 showed up for Saturday's protest in Dublin, and if the vox-pops are anything to go by, less than half were there to protest against water charges.
(Remember the Greek protest chants of a few years ago: "we're not Irish").

The banks are mostly state owned. High interest rates is of benefit to "tax payers" and the exchequer.

Many still recall the 17% interest rates of the Haughey era.
 
I also feel very strongly about this and have written to two td's about it. One never responded and I got a standard "it's not within the remit of the government or Central Bank" reply from another. Anyone I have spoken to who are on a SVR rate mortgage believe that the banks can charge what they like and that there is no point complaining.

I can't understand how the banks can have such a high rate when the cost of funding has dropped. The make up of the SVR is not clear. The banks should be obliged to outline what the SVR is based on, this should be set out in the mortgage contract.

I didn't negotiate the terms of my mortgage I was given a standard contract & while I understood that not all ECB cuts would be passed on I was never advised that should the bank have a loss making product I would have to pay for it!!! Up until 2008/2009 the SVR changed in line with the ECB rate and therefore I do not think that it was unreasonable of me to expect that this would be the case in the future.
 
Hi Daffodils

It's great to see someone else getting active on this. Do you have any objections to naming the TDs involved?

You express your anger very well. Would you be prepared to talk to a journalist about it?

Brendan
 
Make sure you pick your journalist carefully... Dominic Coyle, answering a reader's question (about a tracker margin) in the Irish Time today, also subscribes to the 'sure aren't you lucky to be paying historically low rates' line of thinking:
And, even at 3.25 percentage points above the ECB rate, you still have, by historical standards, a very cheap mortgage in the Irish market.
His take on variable rates (presumably referencing the recent Danske case):
I am aware, of course, that the courts have recently thrown back to the financial ombudsman a case in which a lender raised rates on a variable loan at a time when ECB rates had not risen. It remains to be seen what happens there.
Personally, I am not sure that a bank can be held to have acted unreasonably if a variable-rate contract allows it to adjust rates and if its financial position requires it to increase the margin it is charging on such loans; but we will see what happens.
 
I am aware, of course, that the courts have recently thrown back to the financial ombudsman a case in which a lender raised rates on a variable loan at a time when ECB rates had not risen. It remains to be seen what happens there.
Personally, I am not sure that a bank can be held to have acted unreasonably if a variable-rate contract allows it to adjust rates and if its financial position requires it to increase the margin it is charging on such loans; but we will see what happens.

That seems a ridiculous point by the journalist. It is an issue of competition.
How can banks get away with charging SVR of ECB + 4.45%
I say this because most SVRs are in around 4.5%
There are a couple of reasons I can think of:
Anyone who borrowed 100% in 2003/ 2004 will now owe 110%
Anyone who missed a couple of payments will owe more and will have poor credit rating.
For these people there are few options when it comes to switching.
Therefore banks are charging 4.5% because they have a captive audience.

It is a competition issue and one that either the Competition Authority or the Ombudsman should rule on.
 
I rang our bank recently, ICS when they wrote to tell us Bank of Ireland were taken over our loan. 4.6%, LTV is less than 25% to see if they was any chance of a reduction.

Was told that lots of people had contacted them but they had no facilities to reduce rates.

Luckily have tracker on investment loan so it's no so bad but SVR are getting a raw deal but what can be done.
 
Hi Joe

I thought that Bank of Ireland only took over the trackers and the loans in arrears and that ICS kept the performing non tracker loans?

Have I got that wrong?

It's crazy that you can't move to a better value product. Are you in a position to switch to KBC or AIB which is much better value?

Brendan
 
Brendan,

Fianna Fail's Michael McGrath was highlighting the SVR issues on Newstalk this morning, just before 8:15 a.m.

You'll probably get it on their website later. He was also discussing other matters.
 
Along with the rates, is there not an issue of fairness with SVR mortgages. The bank holds all the power and the borrower is subject to terms that dictate they must pay what ever rate the bank decides. Is the bank free to decide that the rate will be 5%, 50%, 500%? The bank would never sign up to a load where the borrower set the rate so why must the borrower put up with such one-sided terms?
 
It's all about the NPLs...

As pointed about by other posters, the primary reason mortgage rates are so high in Ireland is the high proportion of non-performing loans on the bank's books. It is meaningless to compare mortgage rates across European jurisdictions unless you also compare the rate of non-performing loans.

Take a look at the attached table from the World Bank. You can see that most Eurozone banks (outside of the PIIGS) had non-performing loans as a percentage of total loans between 2009-13 in the range of 3-4% whereas the percentage of NPLs in Irish banks was over 24%. If the banks cannot repossess without huge difficulties (due to cultural, legal or regulatory hurdles) then the direct result is a higher cost of credit. We can't have it both ways folks...

http://data.worldbank.org/indicator/FB.AST.NPER.ZS
 
Along with the rates, is there not an issue of fairness with SVR mortgages. The bank holds all the power and the borrower is subject to terms that dictate they must pay what ever rate the bank decides. Is the bank free to decide that the rate will be 5%, 50%, 500%? The bank would never sign up to a load where the borrower set the rate so why must the borrower put up with such one-sided terms?
This in my view should be a far more serious concern than the actual rates now being charged. The loan contract includes a pricing mechanism that permits the lender to vary the rate charged at its own whim. I find it difficult to believe that such contracts have never been challenged as any contract which gives such power to one party to amend a key condition cannot be fair.
Rather than address the current SVR rate the focus of any opposition should be on the one sided flexibility of such rates. An SVR by its very nature is patently one-sided and unfair and until this issue is properly given due focus and attention banks will be free to raise/lower prices as they see fit. Given the difficulties in changing mortgage provider encountered by many in negative equity or repayment stress this needs to be addressed and focus on the actual current SVR rate is merely a red herring!!
 
It's all about the NPLs...

As pointed about by other posters, the primary reason mortgage rates are so high in Ireland is the high proportion of non-performing loans on the bank's books. It is meaningless to compare mortgage rates across European jurisdictions unless you also compare the rate of non-performing loans.

Take a look at the attached table from the World Bank. You can see that most Eurozone banks (outside of the PIIGS) had non-performing loans as a percentage of total loans between 2009-13 in the range of 3-4% whereas the percentage of NPLs in Irish banks was over 24%. If the banks cannot repossess without huge difficulties (due to cultural, legal or regulatory hurdles) then the direct result is a higher cost of credit. We can't have it both ways folks...

http://data.worldbank.org/indicator/FB.AST.NPER.ZS

I thought we had put funds into Banks to carry foreseen losses.
I thought our main Banks have passed the Stress Tests.
I understand they may not be making money on Trackers but given their borrowing costs , are they losing?
I thought that Variable Rates carried the implied contract that if rates went down , then so did Variable Rates, also if rates went up so does a Variable Mortgage.
I thought that our (austerity) contract with government was to be based on fairness.
Maybe I thought too much!
I start getting bamboozled with figures etc ,but simply do not see fairness for variable rate customers.
I refuse to see why they are being milked !
 
Maybe you still believe in fairies too Gerry :D
Fairness does not enter into any internal discussions on pricing by Banks or most other businesses. The banks are not run by the Government despite the fact that they may still retain controlling interest in some. High rates will facilitate them paying their way out of the austerity funding a little quicker so realistically the Government are getting their money back from BoI and AIB. In that context the bailout funds are fully repayable.
 
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