Any ideas for making the mortgage rates an election issue?

Brendan Burgess

Founder
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41,553
300,000 people are paying mortgage rates much higher than they should be paying.

Government policy could help to bring them down
  1. Make repossessions easier
  2. Bring back Mortgage Interest Supplement for people in difficulty who are engaging
  3. Ban cash backs
  4. Require lenders to offer existing customers the same deals as new customers.
I might do a press release on it next week or the week after.

But if anyone has any ideas, let me know.

Brendan
 

NiallSparky

Registered User
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18
Banning cash back would be annoying, it's a good option to have for certain people. I took out a mortgage of 7k less than I needed to because of the cash back, giving me a better financial outcome than a slightly lower interest rate would have, and it dropped me into a lower LTV band.
 

MrEarl

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1,953
Hello,

I think that seeking to ban cash back offers would be a mistake. First time buyers often avail of them to help pay for furniture etc post acquisition of their houses.

Instead, what I think would be better, would be for the Central Bank to force all lenders to offer homeloans with the option of cashback, but clearly setting out the difference in cost of the loan, if the cashback option is taken. Once the difference is very clearly shown, then its down to the consumer to make an informed decision.

Getting back to the concept of trying to make this an election issue - perhaps drawing up a charter and asking all politicians publically to sign up to it, prior to voting day, with their response to the request published in advance of the election, might be an alterative approach. The charter could commit them to doing certain things, such as changing the law to allow faster repossessions in instances where the borrower is not co-operating, or committing to instructing all Banks which are majority owned by the State, to issue a permanent, or semi permanent (5-10 year term) price promise in respect of their SVRs (ie all Banks to commit to never allowing their SVR to go more than "X" over the ECB rate etc)
 
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Brendan Burgess

Founder
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41,553
Cash backs are anti-consumer.

It is a mechanism that the banks use for keeping mortgage rates high on their existing books.

Bank of Ireland and ptsb could not compete for new business with KBC and Ulster Bank without cash-backs because their rates are too high.

Cash backs allow them to keep the rates high for existing customers while still getting new business.

If cash backs were banned and lenders were obliged to make any deal available to new customers available to existing customers, then all the banks would be obliged to compete on mortgage rates.

And that would bring mortgage rates down for everyone - new customers and existing customers.

Brendan
 

Brendan Burgess

Founder
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41,553
Make repossessions easier
Nor will number 1! [help you to get elected]


Part of the reason for the very high rates is the high level of defaults. The high level of defaults is due in part to the lack of any imminent threat of losing one's home.

If we made repossession easier, people would prioritise their mortgages more.

This is another problem with Irish politics. No one wants to say the obvious because it might upset a few people. So we don't change things which need to be changed.

Brendan
 

NoRegretsCoyote

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1,603
This is another problem with Irish politics.
You are right, but it's not just politics.

A lot of it comes down to judicial discretion as well with judges and county registrars endlessly kicking to touch in situations where there is clearly no borrower engagement. It's the same for insurance claims where judges will aware €30k or €40k to someone with relatively minor injuries and who has made a full recovery.

Judges aren't accountable to the people. This is for good reason, but it often leads to bad policy.
 

jim

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556
Cash backs aint anti consumer. Im a consumer and i availed of it as did many others. Theyre a brilliant way of making a few buck off the banks.
 

RedOnion

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4,597
Theyre a brilliant way of making a few buck off the banks
But you're not making a few bucks off the bank (unless you switch again). The cash back is priced into the rate you pay.

I think that seeking to ban cash back offers would be a mistake. First time buyers often avail of them to help pay for furniture etc post acquisition of their houses.
Simple solution - change the maximum LTV to 93% across the board. Now instead of FTB having to save 10%, and get 3% back for furniture, they save 10%, and keep 3% for themselves. But they get a better rate.
 

MrEarl

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1,953
Simple solution - change the maximum LTV to 93% across the board. Now instead of FTB having to save 10%, and get 3% back for furniture, they save 10%, and keep 3% for themselves. But they get a better rate.
Good point.

But there's as little chance of that happening, as allowing borrowers in their 20s take out 40-45 year mortgages, to enable them borrow more and get on the property ladder. The fact that most in their 20s will be working for 40-45 years into the future, so will have the ability to earn to repay the debt doesn't seem to matter.
 

MrEarl

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1,953
I switched 3 times and got cashback each time which was nice. How is it anti consumer? Its pro consumer - if the consuner is savy enough.
I would agree.

Assuming a borrower hasn't been locked into a fixed interest rate, they are free to move lender as they wish.
 

Eureka101

Frequent Poster
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50
Hi all,

As I’ve highlighted on a separate thread, extremely high, unreasonable interest rates are also being inflicted on Irish consumers with performing loans by the Vulture such as Pepper finance.

This must be made an election issue also.

14000 Danske customers were transferred to pepper when they pulled out of the country. How many remain I don’t know but based on the supposed level of inertia that is discussed I guess a high percentage remain. This is not including the many thousands more who have had their loans transferred to other vulture funds also.

I’m sure if this was made an election issue then that candidate would receive the vote of these customers. I certainly would..

The time has come to resolve this and the vulture funds are simply another, just as important aspect of the housing crisis in this country.
 

MrEarl

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1,953
Hi,

What do you see as the solution to the issue that you've raised?

What exactly do you think politicians should be asked to do, legislate to put a cap on the lending margin that a lender can charge over the ECB rate for their homeloans, for example?

I don't think that could be done, as it would be interfering in the market and discourage competition - be it the potential for attracting me lenders into the market, or keeping all current lenders here.

Even if the above were to happen, I really cannot see how such an action could be enforced on existing homeloans, whatever about the possibility of such a price cap being introduced for new loans.

I know that In digressing here, but at this stage, the large majority of Borrowers who have SVRs should be looking at refinancing, if they aren't happy with they current arrangements. Something for another discussion thread obviously...
 
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Leper

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1,216
What a change in times and attitude. I know I keep on harping when the AIB Home Loan was 19.75%. The government moved to give relief to building society loans while ignoring mortgagees from the banks. Hardly anybody raised an eyebrow.

I remember the interest rate being lowered to 13.5% with the option of fixing the rate for one year and I thought all our Christmases had come together.

. . . . what a change in times.
 

Itchy

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374
What is the impact of the stricter capital requirements on Irish banks vs. EU banks? If they have to retain more capital, they earn less on it and must charge the consumer for it as a consequence. If capital requirements were reduced this would lower interest rates in the market and increase affordability.
 

Zenith63

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591
I switched 3 times and got cashback each time which was nice. How is it anti consumer? Its pro consumer - if the consuner is savy enough.
If somebody needs to be savvy enough not to get tricked into paying more than they should, then that is not pro-consumer. You must realise that you switching three times while the majority of the population don’t switch at all makes you an expert at this and not a regular consumer.

Cash back offers are there to obfuscate the real cost you’re paying, plain and simple. They either need to go, or the banks must be forced to use the true cost of the mortgage as their headline rate in my opinion.
 

Dauhee

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135
  1. Make repossessions easier - this is absolutely necessary, inaction is being abused by some, making the rest pay for it
  2. Bring back Mortgage Interest Supplement for people in difficulty who are engaging - I'm not sure, maybe it should be up to the banks to handle problem loans, force them to regulate themselves rather than give high risk loans and know the state will bail out
  3. Ban cash backs - absolutely
  4. Require lenders to offer existing customers the same deals as new customers - absolutely
I would also argue bring fairness to variable rates also, currently banks are forcing customers to lock in on fixed, variables are artificially high

ultimately, comparing mortgages should be transparent for all customers
 

gnf_ireland

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1,415
Being honest, I think the days of mortgage rates being an election issue have been lost (in general). Yes, there are probably a few fringe cases around mortgages being sold to venture funds and those who have LTV's over 90%, but outside of that, its not going to grab the publics attention - I am sorry to say !!

The financial topic of this election will be insurance costs... rightly or wrongly, mortgages rates is 'old news' to most people
 
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