68 year old gets PIA involving tracker rate for life

He retired in February 2020 and has been relying on the State pension for income. Mr O’Regan’s house was valued at €210,000 and there was €97,000 remaining on his mortgage.

Under the arrangement approved by Judge Mary Enright, Mr O’Regan will be allowed to remain in the house for his lifetime on the reduced mortgage repayments until he is 98.

His new monthly repayments will be set on a tracker mortgage for his lifetime.

This is absolutely crazy and explains why other borrowers are paying the highest mortgage rates in the EU.

Fully agree that he should have got an interest-only mortgage for life, but it should have been at market rates or maybe even above market rates.

If he were to get a life loan it would have been at 5%. So either a variable rate of 3% or a rate fixed for 20 years of 4% would be appropriate.

Brendan

Brendan Burgess said:

His new monthly repayments will be set on a tracker mortgage for his lifetime.

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The article doesn't make clear, but it is an interest only tracker mortgage.

A contributory state pension is about €1100 a month. €93 a month is not very much compared to his income and his heirs will still get an inheritance as the debt won't grow.

He would probably pay a bit more as a share of income on a local authority differential rent scheme......

In July, the Central Bank called on lenders to be more “extensive or ambitious” in finding solutions for more than 29,000 people in long-term mortgages arrears. The bank said that a quarter of borrowers in this category were aged over 60.

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This is the most shocking bit, there is almost 30,000 people still in long term arrears. I am presuming most of them are from a situation that arose 13/14 years ago. They should have been sorted by now. In some cases, people are clinging onto properties that they can never afford to pay off. In others, people simply haven't heard back from the banks and are unable to move on with their lives with this hanging over them.

Brendan Burgess said:

This is absolutely crazy and explains why other borrowers are paying the highest mortgage rates in the EU.

Fully agree that he should have got an interest-only mortgage for life, but it should have been at market rates or maybe even above market rates.

If he were to get a life loan it would have been at 5%. So either a variable rate of 3% or a rate fixed for 20 years of 4% would be appropriate.

Brendan

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Ulster Bank won't miss the money. The chap will be glad he had a nice judge on the day.

Yes, but ordinary borrowers have to pay for it.

Brendan

Well maybe (some of) those borrowers are glad that a bloke like this and others get to stay in their homes. Not just a financial matter. And banks are hardly models of financial probity are they given their abysmal track record in recent decades of wasting money on daft ventures and not being run properly.

Unless it's a one bed house, shouldn't something like rent a room have been considered in order to generate additional income to service the loan? Although, as pointed out above, €93 p.m. is probably already only a marginal chunk of the existing pension income? But maybe he's not on a full pension or something?

The repayment is less relevant here.

But he should be charged the full market rate interest which would be about 4% .

It's crazy that he is given a low interest rate loan for life.

Brendan

I'm from the old school, and if you couldn't afford something you did without it. To me, all this reneging on debt is just encouraging others to not pay what they owe. Why would anyone pay back what they borrow if this is the end result? Farcical in my opinion, and I well understand that others who don't like paying their debts think i'm wrong.

NoRegretsCoyote said:

The article doesn't make clear, but it is an interest only tracker mortgage.

A contributory state pension is about €1100 a month. €93 a month is not very much compared to his income and his heirs will still get an inheritance as the debt won't grow.

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What he is deemed to be able to afford is probably driven, at least in part, by the ISI's reasonable living expenses (RLE) calculator.
In this example - assuming a single person, no dependents, no car and €93 mortgage costs per month - the calculator comes up with an RLE figure of €1,031.

Hypothetical Q. Put aside the wrongs(and silliness) of it for a minute ..
If everybody in the country decided to stop paying their mortgage from today onwards. What would happen?

Laughahalla said:

Hypothetical Q. Put aside the wrongs of it for a minute ..
If everybody in the country decided to stop paying their mortgage from today onwards. What would happen?

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For one thing, there would be an immediate shortage of housing, a lot of angry people, and a stupid general election that some me me me people think would solve everything

noproblem said:

I'm from the old school, and if you couldn't afford something you did without it. To me, all this reneging on debt is just encouraging others to not pay what they owe. Why would anyone pay back what they borrow if this is the end result? Farcical in my opinion, and I well understand that others who don't like paying their debts think i'm wrong.

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Which is why the central bank restrictions on borrowing should remain in place. The levels of borrowing during the Celtic Tiger was crazy. All these people funding their lifestyles through equity release on their homes. Owning multiple properties with no money down, all equity release and 100% mortgages. Everything reliant on property prices going up forever. I have seen a case where an underwriter gave the loan on the assumption that 2 of the 3 bedrooms were rented for the 35 years of the mortgage. The person who got the mortgage is now married with children, so of course the 2 rooms aren't rented out. The banks have to share some of the blame for this.


Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)

Brendan Burgess said:

But he should be charged the full market rate interest which would be about 4% .

It's crazy that he is given a low interest rate loan for life.

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I tend to agree. An open-ended interest-only tracker like this is very expensive in terms of capital for the bank. Paid for by other borrowers of course.

A fairer solution would see a higher interest rate and a commitment never to repossess .

If his kids want an inheritance they could help him pay down the capital.

Steven Barrett said:

Which is why the central bank restrictions on borrowing should remain in place. The levels of borrowing during the Celtic Tiger was crazy. All these people funding their lifestyles through equity release on their homes. Owning multiple properties with no money down, all equity release and 100% mortgages. Everything reliant on property prices going up forever. I have seen a case where an underwriter gave the loan on the assumption that 2 of the 3 bedrooms were rented for the 35 years of the mortgage. The person who got the mortgage is now married with children, so of course the 2 rooms aren't rented out. The banks have to share some of the blame for this.


Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)

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I agree the banks have to share some of the blame. When they took the country to the brink and beyond of bankruptcy, when they duped 40,000 people off their trackers, when they repossessed houses and BTLs they had no right to do under the tracker scandal - in my view the banks then lost the legitimacy they had and if they have to carry extra capital now then it's their mistakes that have led in large part to this. Ordinary punters in genuine difficulties or trying it on are going to act selfishly via the courts and why wouldn't they if they see banks doing it.

NoRegretsCoyote said:

If his kids want an inheritance they could help him pay down the capital.

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Why would they with deals like this?

I read this story yesterday , there's been others recently whilst not similar ultimately the results the same. I noticed the Bank objected to the PIA but the Judge approved. I'm getting a sense there will more and more of these arrangements.

Obviously I don't know the full circumstances but having a €97,000 mortgage balance on retirement and indeed quite a high monthly repayment on retirement was surprising.

I'm going to be Blunt and come at this from a different angle, some here will know, I have a separate thread re my attempts to deal with relatively small arrears and mortgage balance, my case has a medical aspect, reduced earnings etc. I've literally bent over backwards, got some personal financial support , have cleared 80% of arrears, have been paying full mortgage for over 2 years and Mortgage protection separately and I can say without fear of contradiction the behaviour of the VF I'm dealing with is beyond shocking, even Mabs (brilliant), exasperated. I've no problem naming the VF, Start who purchased my mortgage from PTSB in 2019.

A litany of mistakes, lost paperwork, incorrect APR being charged, Zero response to queries and a major Cock up re mortgage protection policy expiration date (that was the fault of PTSB) these but a few extraordinary things that came to light during the process of seeking documentation.

I certainly don't expect special treatment, not looking for reduced interest rates but at a minimum expect fairness and a willingness to actually engage, the very concept those in arrears are accused of not doing, its just astonishing what I've experienced over the past 3 months, which actually started as a result of an incorrect demand for full payment of my mortgage balance when an arrangement was in place and being adhered too.

I'm at a stage were I've given up dealing with this nonsense, I'll continue paying my mortgage and address miniscule arrears when I can, they can quite frankly do what they like at this stage and honestly , I'd relish a day in court.

I'm not for a minute suggesting there are those acting the maggot , but I'm certainly not one, I heard reporting last week of 122 repossession cases up before a local circuit court, some genuine hardship cases, some beggars belief.

Steven Barrett said:

This is the most shocking bit, there is almost 30,000 people still in long term arrears. I am presuming most of them are from a situation that arose 13/14 years ago. They should have been sorted by now. In some cases, people are clinging onto properties that they can never afford to pay off. In others, people simply haven't heard back from the banks and are unable to move on with their lives with this hanging over them.

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Banks are literally paying to sweep this under the carpet.

NoRegretsCoyote said:

I tend to agree. An open-ended interest-only tracker like this is very expensive in terms of capital for the bank. Paid for by other borrowers of course.

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Why is it so bad for the bank? And if it is, why aren't they offering me a hefty discount to buy out my 1% interest only tracker taken out in 2005?