If mortgage rates were not so high, there would be less risk

This goes back to the mortgage rates discussion. There would be far more affordability, and less real risk to individuals and the system, if variable rates weren't rigged (did someone mention the free market?!!) to extortionate levels.

The Central Bank finger-wagging about affordability and risk in this context is sheer hypocrisy.

keepon said:

This goes back to the mortgage rates discussion. There would be far more affordability, and less real risk to individuals and the system, if variable rates weren't rigged (did someone mention the free market?!!) to extortionate levels.

The Central Bank finger-wagging about affordability and risk in this context is sheer hypocrisy.

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If mortgage rates were lower, house prices would be even higher than the levels they are at now

Affordability to repay mortgages are stressed tested at variable rate plus 2%. If rates were higher, people would have even greater difficulty in meeting this requirement.


Steven
www.bluewaterfp.ie

There would be far more affordability, and less real risk to individuals and the system, if variable rates weren't rigged (did someone mention the free market?!!) to extortionate levels.

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Fair comment. This is currently a highly profitable business for banks and with the exit of the foreign competitors there is no incentive to reduce margins. The reduction in interest rates has resulted in higher profit margins to the banks which are not being passed on to the clients. However there is little that can be done to force the banks to reduce their margins and unless competition rises it is unlikely that this will change in the short term. Worse still is the prospect (certainty) of ECB rates rising in the medium term and these rises will be passed on to customers. A stress test of 2% is therefore necessary to account for the rate rise potential.
In my view the new CB restrictions on mortgage lending while being unpalatable are necessary to ensure that over-borrowing does not arise!

This consultation is an excellent opportunity for people to make a public comment about high variable rates.

So I would encourage people to make submissions if only to highlight this issue.


Brendan

As Keepon correctly pointed out: if variable rates on existing mortages weren't so high there would be less people struggling to make repayments.
The main reason people are in arrears is due to extortionate rates.

The central bank seems to be secretly supporting the great banking rip-off. A comment from the central bank would have political effect but none such comment is forth coming.

The central bank has said that competition will force down interest rates: did they notice the banks that are trying to get the hell out?
Also, how can a customer switch lender if customer is in negative equity? Will the central bank help those customers? Impose a condition on lenders they must accept negative equity loans? Thank you Mr. Honahan?
They can impose a 20% deposit on new borrowers. Why not help existing borrowers?

Quote from Independent yesterday:

Banking analyst with Merrion Capital, Ciaran Callaghan said all banks will be forced to decrease their variable rates.

Mr Callaghan, who correctly predicted the AIB rate reduction, said: "We are not surprised to see AIB announce these standard variable rate price reductions, bucking the trend over recent years, and expect other banks to follow suit in coming months."

He said that profit margins were so high on new mortgages that AIB rivals would have no choice but to lower rates.

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The 2 main reasons, IMO, why people are in arrears are :
1. job losses/loss of pay
2. strategic defaulting especially amongst BTL's

Nothing really to do with interest rates. ECB rate was around 3% to 4% in 2008, so trackers were higher then v's what SVR's are now