gnf_ireland
Registered User
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- 1,441
I was reading another thread today, and someone called out the barriers to switching. 3 ones where listed, and I was wondering what could be practically done to assist each of those groups reduce their SVR rate
1. Those who can move, but don't due to apathy, time or some other reason
2. Those who cannot move as they don't qualify for lending under the new Central Bank rules
3. Those who cannot move because their credit rating is impaired as a result of the recession
I believe there is a 4th group, which is effectively non-performing mortgages, but realistically I don't see how any bank would want to accept these customers currently, unless they have a very favourable LTV !
Group 1 - these group need to act. How to get them to act is the million dollar question, but the more that do may at least help in the short term
Group 2 - this is a difficult one, especially if they are a performing mortgage, and are likely to benefit from lower repayment amounts. I would be in favour of these customers moving, even if in negative equity. I am wondering if there is any form of 'risk sharing' that could be done by the two banks to assist these customers - even a split mortgage? The original bank should be happy to reduce their exposure to this customer, so may be willing to support some sort of proposals here? Any ideas on this group ?
Would a form of insurance assist here that would bring the balance down to 80% LTV in the event of a default within the first 3-5 years of the mortgage for example?
Group 3 - this one is difficult. As a lender I would not be able to 'justify' offering the same rate to someone who has defaulted before as to someone who has never defaulted, no matter what the circumstance. There has to be a general acceptance of a premium here in my view. Of course this would depend on new LTV and LTI ratios, and on the mortgage being paid up again and performing. This would obviously depend on the level of engagement of the lender with the bank during the difficult period etc.
This is in effect sub-prime lending for a number of years until the credit rating has recovered.
Would a form of insurance assist here that would pay a years mortgage payments in the event of a default within the first 3-5 years of the mortgage for example?
Those who are in Groups 2 & 3 may be in a very difficult situation.
The only other proposal on the table is to cap the interest rates to be charged on mortgages - but no one appears to want this power currently.
Any other ideas on how these customers can be assisted ?
1. Those who can move, but don't due to apathy, time or some other reason
2. Those who cannot move as they don't qualify for lending under the new Central Bank rules
3. Those who cannot move because their credit rating is impaired as a result of the recession
I believe there is a 4th group, which is effectively non-performing mortgages, but realistically I don't see how any bank would want to accept these customers currently, unless they have a very favourable LTV !
Group 1 - these group need to act. How to get them to act is the million dollar question, but the more that do may at least help in the short term
Group 2 - this is a difficult one, especially if they are a performing mortgage, and are likely to benefit from lower repayment amounts. I would be in favour of these customers moving, even if in negative equity. I am wondering if there is any form of 'risk sharing' that could be done by the two banks to assist these customers - even a split mortgage? The original bank should be happy to reduce their exposure to this customer, so may be willing to support some sort of proposals here? Any ideas on this group ?
Would a form of insurance assist here that would bring the balance down to 80% LTV in the event of a default within the first 3-5 years of the mortgage for example?
Group 3 - this one is difficult. As a lender I would not be able to 'justify' offering the same rate to someone who has defaulted before as to someone who has never defaulted, no matter what the circumstance. There has to be a general acceptance of a premium here in my view. Of course this would depend on new LTV and LTI ratios, and on the mortgage being paid up again and performing. This would obviously depend on the level of engagement of the lender with the bank during the difficult period etc.
This is in effect sub-prime lending for a number of years until the credit rating has recovered.
Would a form of insurance assist here that would pay a years mortgage payments in the event of a default within the first 3-5 years of the mortgage for example?
Those who are in Groups 2 & 3 may be in a very difficult situation.
The only other proposal on the table is to cap the interest rates to be charged on mortgages - but no one appears to want this power currently.
Any other ideas on how these customers can be assisted ?