"Central Bank chief bottles it on home loan overcharging "

[Gerry Canning]

Mr Earl,

I am not jumping one way or other or getting into whose job is what ,or is this democratic etc,
but what is very clear to me , is that if the Variable Rate people pressed their representatives , those representatives would press the Central Bank and the Banks to reduce rates .
No Central Bank should be moved by political persuasion , but they should be moved by people persuasion via peoples representatives, otherwise the Central Bank stays a market only function yet ,by their own admission they have a consumer function..

 

[MrEarl]

No Central Bank worthy of the name should be influenced by political opinion, or a government's hopes of re-election.

Hi Tommy,

For the avoidance of doubt, I was referring exclusively to Government's relationship with the Banks over which a majority shareholding is held and not the Central Bank, in my post above (ref: Paid's post above quoting my original post about the Government having a majority stake in AIB & PTSB).

Hopefully, there has been no confussion here, but just in case.....

 

[MrEarl]

Mr Earl,

I am not jumping one way or other or getting into whose job is what ,or is this democratic etc,
but what is very clear to me , is that if the Variable Rate people pressed their representatives , those representatives would press the Central Bank and the Banks to reduce rates .
No Central Bank should be moved by political persuasion , but they should be moved by people persuasion via peoples representatives, otherwise the Central Bank stays a market only function yet ,by their own admission they have a consumer function..

Mr. Canning,

While I think I know the point you are making regarding the consumer protection function, there should be a clear and absolute difference between protecting the consumer (against misleading advertising, or how the consumer is dealt with when in arrears etc.) and dictating the market price of a service (even if it is something as important as lending money).

Our Regulator for Communications, for example (Mr. Earl pauses and resists the temptation to criticise said Regulator for other reasons ), does not set the price for telephone calls.

Under "normal" circumstances, the market should dictate the cost of goods and services. Where our market fails, is because we are not in "normal" circumstances, because the Irish State ownes two of the key lenders in the homeloan market. We are either an open economy, or we are not. Simple.. but not when it comes to little old Ireland

 

[Gerry Canning]

Mr Earl, I really do hear you on what should be clear (water) between functions.
That normally works but is (overrun) on major items and some (grey) creeps in.
I suggest this is one of the few major areas when Mr Central Bank needs to work a bit sideways in his consumer remit.

I believe too many times our (BETTERS) hide behind lovely reasonings ,such its not my remit, or I can,t be seen to etc etc , then whose remit is it ?

 

[MrEarl]

....then whose remit is it ?

Hello Mr. Canning,

In short, if you subscribe to the concept of an open market economy, then competition dictates. That said, keeping in mind the subject matter, the country we live in etc. I believe it is the current Government's "remit" in this instance, given the Government (on behalf of the people of Ireland) own both AIB & PTSB - which together, I would estimte control in the region of 40% of the homeloan market, perhaps more.

It is all too convenient for the current Government to claim that they don't have the power to act in their capacity as the government, but they do have the power to act in their capacity as majority shareholder in the two Banks.

 

[demoivre]

If you're an existing home loan borrower with a higher SVR than the rates offered on new home loan products then you should switch your mortgage.

There are only 2 barriers to this:
1) You're too lazy to do this,
2) You wouldn't qualify under the new CBI lending rules for the size of mortgage you need.

There is a third and very significant barrier to switching and that is that those who have damaged credit records can't switch mortgage provider.
Also switcher mortgages don't come under the new Central Bank lending rules.

 

[demoivre]

You have someone who has already defaulted on their loan versus someone who has never defaulted on their loan. If you were in the business of lending money, who would you say is higher risk?

Well I'd like to think that I wouldn't have the box ticking mentality of your typical underwriter. If person 1 defaulted because of unemployment and was now back working full time I wouldn't have issues lending to them. If person 2 was a rural publican with an unblemished credit record, but with his profits sinking faster than a drowning man I would be very nervous about lending to him. Your typical banker would stop person 1 dead in his tracks at the first hurdle which would be his ICB record. Geniuses.

 

[44brendan]

I wouldn't have the box ticking mentality of your typical underwriter

I would probably broadly fit the description given above of the typical underwriter. Unfortunately, despite the rational argument made by you re the underlying problems of the various defaulters banks tend to be a little bit more simplistic in their approach to requests from switchers. I.e. if you have a poor track record the reason for this is largely irrelevant to the proposal.
I don't necessarily disagree with your logic but if I wanted to keep my job I wouldn't be approving too many applications where a default track record is evident!!

 

[Mick Fitzgerald]

If you're an existing home loan borrower with a higher SVR than the rates offered on new home loan products then you should switch your mortgage.

There are only 2 barriers to this:
1) You're too lazy to do this,
2) You wouldn't qualify under the new CBI lending rules for the size of mortgage you need.

If the reason is 1) then tough.
If the reason is 2) then you've no argument for incurring the same SVR as someone who qualifies for the new mortgage. Someone who qualifies for the new loans must comply (15% exemption level excluded) with the CBI rules and thus have superior credit metrics (lower LTV &/or better LTI coverage).

Switching, either actually doing it or realistically threatening to do it, is the only to force banks to lower their rates.

Lets not mention the obvious, but what happens for example, if you are in negative equity ( a large proportion of mortgages in this Country are ), then the question of switching is largely academic; the bank's are well aware of this situation and like all parasites, they take full advantage of the host and gorge themselves.

 

[gnf_ireland]

@demoivre When I first applied for my mortgage in 2010, the banks had 3 main 'criteria'
- permanent job > 1 years service (ideally at least 3)
- 20% deposit
- work in a reasonably recession proof industry

I am an independent IT consultant, and have been for 15 years. The only times I have been not working is between major projects where I have tended to take 2-3 months off (before my kids arrived) to recharge the batteries after months of 12-14 hour days. I had a very good deposit available (~40%), purchasing in a 'very good' area (according to the experts). I should also state that I have an unblemished credit rating

Each and every bank (other than 1) declined me at the first hurdle as I failed the first criterion - I did not have a permanent job. I eventually got a mortgage with the bank I had been doing business with for 10 years, as I managed to get past the first hurdle by going directly to them rather than via a broker. Once I had someone actually review the application it was deemed to be 'solid'.

Had I been not been able to get a mortgage at the time I would no doubt have been exceptionally angry, given I had been offered in excess of 1 million in 2007 and had declined it, as I deemed the market had gone crazy.

I am not saying the rules should be the rules, but I do agree there needs to be a level of flexibility in them.

Would I have accepted I was a higher risk than 'standard' and been asked to overpay by say 10% (pay 1100/month instead of 1000/month for example) for say 12/24 months, I would have agreed to it on the assumption the 100/month came off my mortgage balance and was not just an interest surcharge.

Sometimes when you are 'non-standard' and you want rules to be 'bended' for you, you also need to give something back. Sometimes its worth putting that extra proposal on the table to see if they say yes !

 

[gnf_ireland]

Lets not mention the obvious, but what happens for example, if you are in negative equity ( a large proportion of mortgages in this Country are ), then the question of switching is largely academic; the bank's are well aware of this situation and like all parasites, they take full advantage of the host and gorge themselves.

I don't know the numbers, but I would have expected most of the negative equity mortgages to be trackers rather than SVR's. There are something like 300k SVR's at the moment, and I am assuming the majority of these were taken out since 2008 (no more trackers) - maybe I am wrong !

 

[Andy836]

Lets not mention the obvious, but what happens for example, if you are in negative equity ( a large proportion of mortgages in this Country are ), then the question of switching is largely academic; the bank's are well aware of this situation and like all parasites, they take full advantage of the host and gorge themselves.

Tough, clearly you're LTV is higher than those that qualify under the new CBI rules so you can't argue a case for having the same interest rate as them.

 

[Sarenco]

I don't know the numbers, but I would have expected most of the negative equity mortgages to be trackers rather than SVR's. There are something like 300k SVR's at the moment, and I am assuming the majority of these were taken out since 2008 (no more trackers) - maybe I am wrong !

The vast majority of performing repayment mortgages, whenever written, are not in negative equity. Less than 40% of mortgages originated at the absolute height of the credit bubble (2007) are in negative equity at this stage.

 

[Mick Fitzgerald]

The vast majority of performing repayment mortgages, whenever written, are not in negative equity. Less than 40% of mortgages originated at the absolute height of the credit bubble (2007) are in negative equity at this stage.

Is that due to restructuring of the mortgages on the part of the banks, or solely down to the borrowers paying down the mortgages ? I still believe there are a large proportion of mortgages in this Country in negative equity. I would class anything over 12% of total mortgages being in negative equity as a large proportion.

 

[Sarenco]

Is that due to restructuring of the mortgages on the part of the banks, or solely down to the borrowers paying down the mortgages ?

It's a combination of borrowers continuing to pay down their mortgages and the increases in house prices that we have seen nationally over the past three years. I don't know the precise proportion of performing annuity mortgages that remain in negative equity but around 10% or so sounds about right.

Also, bear in mind that most performing mortgages in negative equity were originated in 2005/2006/2007 when trackers were common. In other words, many of these borrowers would not benefit from switching.

 

[Brendan Burgess]

A good opinion piece by Charlie Weston in yesterday's Sindo

Lane says Central Bank is in many ways powerless - that's a great start then...

"The idea that the regulators can dictate to financial institutions is a myth, you see.

Never mind the fact that the Central Bank does indeed dictate how things should be done in a whole raft of areas that impact on consumers.

It was recently admitted by the previous governor, in a letter to Finance Minister Michael Noonan, that general insurance companies had been told by his staff to increase their premiums.

Motor premiums rose by an average of 31pc in the past year - and are expected to keep rising, with past regulatory failure a feature of this mess.

From the start of this year, credit unions were told by the Central Bank that they cannot accept savings of more than €100,000 per member.

And the Central Bank was recently named the best in the world precisely because it now dictates to first-time buyers how big a deposit they need to get mortgage approval"

 

[Black_Adder]

You wont get too many bank types agreeing or disagreeing - as they are not allowed criticise the Central Bank.