Cashback mortgages - academic article

There are plenty of ways that banks could control this. I offered one. Let's see if its valid or not.
 
elacsaplau said:
There are plenty of ways that banks could control this. I offered one. Let's see if its valid or not.
Click to expand...

im not sure what point you are trying to make, i presume banks solicitors worded the clawback on cash back provision yet it was made invalid, so a solicitor chiming in on your suggestion hardly holds much weight anyway?

their control such that it exists is consumer intertia
 
elacsaplau said:
There are plenty of ways that banks could control this.
Click to expand...

If the banks begin to see this as a problem there is a very easy way to limit it - offer the cashback 6 months after the mortgage has been drawn down.

It would mean most loan offers would have expired if they were applied for at the same time as the new mortgage - so would mean the person would have to apply in sequence, acting as a deterrent. The legal costs would be likely to be higher as well, because of the time period involved etc.

In the grand scheme of things, its unlikely to become an issue as so few people switch anyway and then those that do are unlikely to switch multiple times. It really is a fringe case scenario, although can be highly rewarding for those who do it !
 
gnf_ireland said:
If the banks begin to see this as a problem there is a very easy way to limit it - offer the cashback 6 months after the mortgage has been drawn down.

It would mean most loan offers would have expired if they were applied for at the same time as the new mortgage - so would mean the person would have to apply in sequence, acting as a deterrent. The legal costs would be likely to be higher as well, because of the time period involved etc.

In the grand scheme of things, its unlikely to become an issue as so few people switch anyway and then those that do are unlikely to switch multiple times. It really is a fringe case scenario, although can be highly rewarding for those who do it !
Click to expand...

i didnt have concurrent loan offers and switching wasnt an issue for me personally.
 
Yes as you say it's only a small problem for the banks. The 6 month rule wouldn't deter me, you could still get 3 mortgages in say 13 months which is great. It will be interesting to see how someone gets on when they go back to BOI after 12 months looking for a mortgage with them if they already got the cash back previously, PTSB is 24 months so a long wait and EBS only allowed cash back once on the same property but you can get it again if you sell and buy a new property.
 
Blackrock1 said:
i didnt have concurrent loan offers and switching wasnt an issue for me personally.
Click to expand...
I never said it applied to all scenarios, but it is more work for people :) So few people switch in the first instance, most that do multiple switching in a short period are likely to have concurrent loan offers. Removing this adds to the workload and may deter a few more. It does not stop it, it just makes the person want it more

People who are passionate about it will do it anyway... the others probably not as it would be too much hassle !

I have said it multiple times - AAM is not a baseline for the behaviour of general population for financial matters.
 
I applied to 3 banks 3 months ago to switch. As of today, I have 2 offers (ptsb and aib) and am awaiting 1 offer (boi). It seems that there is always a hurdle and I am not sure if I would do it again if I had a time machine. After solicitors and valuation fees for me the net gain is about €6k but given the time and effort I have decided it isn't worth it or me. everyone is different of course. I sit in front a computer each day for work so it should be easier for someone like me to keep on top of this and keep things moving but I have found it difficult and head-wrecking at times.

I have paid for 2 valuers already at total cost of about €300 but I am now expecting that there will be an issue somewhere along the way re drawdown and I fear I will regret ever doing this.

I have friends asking me if its worth doing and im now inclined to say that it isn't but lts see how its pans out over the next few months.
 
jim said:
I applied to 3 banks 3 months ago to switch. As of today, I have 2 offers (ptsb and aib) and am awaiting 1 offer (boi). It seems that there is always a hurdle and I am not sure if I would do it again if I had a time machine. After solicitors and valuation fees for me the net gain is about €6k but given the time and effort I have decided it isn't worth it or me. everyone is different of course. I sit in front a computer each day for work so it should be easier for someone like me to keep on top of this and keep things moving but I have found it difficult and head-wrecking at times.

I have paid for 2 valuers already at total cost of about €300 but I am now expecting that there will be an issue somewhere along the way re drawdown and I fear I will regret ever doing this.

I have friends asking me if its worth doing and im now inclined to say that it isn't but lts see how its pans out over the next few months.
Click to expand...

really depends on the size of the mortgage, smaller the mortgage smaller the gain, the amount of work involved is the same
 
6k is 12k before tax. If you were to use it to overpay, it's worth 24k before tax. Now imagine all it cost you to earn that 24k bonus was to do some admin at work. Pretty nice payout!!
 
jim said:
After solicitors and valuation fees for me the net gain is about €6k but given the time and effort I have decided it isn't worth it or me. everyone is different of course. I sit in front a computer each day for work so it should be easier for someone like me to keep on top of this and keep things moving but I have found it difficult and head-wrecking at times.

I have paid for 2 valuers already at total cost of about €300 but I am now expecting that there will be an issue somewhere along the way re drawdown and I fear I will regret ever doing this.
Click to expand...
I do think their are lots of ways all of this could be made so much easier - although I fear it may take a decade or so for them to be implemented...

The use of blockchain technology in real estate could be a real game changer. The idea that an immutable record of ownership, and charges against a property, could be accessible would really disrupt the current archaic process beyond belief. The idea that valuations could be stored on a public accessible blockchain and guaranteed by a professional body, could dramatically simplify the experience and reduce costs significantly.

But will it ever happen - I am not sure. I think the legal profession has too much to lose and would fight it to the bitter end. It would take a true visionary within the courts service to instigate this type of change. That said, you can see digital disruption slowly tackling some industries, with Fintech being the big one at the moment. I live in hope :)
 
Blackrock1 said:
really depends on the size of the mortgage, smaller the mortgage smaller the gain, the amount of work involved is the same
Click to expand...
Absolutely ... everyone's situation is also unique.

Self employed or company directors have to put in a lot more effort than PAYE employees for example...
 
Hi all, really interesting discussion on multiple switches. I'm due to draw down soon with BOI as a FTB, and can't seem to get an idea of roughly how much it would cost to switch to EBS approx. 3 months from drawdown.
Fixed for 3 years @3%
Amount 340,000

Has anyone any advice?
 
Do banks turn down mortgage applications when they see that the person has already switched relatively recently?
 
With all the new rules regarding switching and the Central Bank making it easier to Switch the banks can't refuse you simply because you are switching again. It's a free open market and if you meet all the lending criteria then they can't refuse you IMO.
 
Sean Og said:
the banks can't refuse you simply because you are switching again
Click to expand...
Yes they can. There is nothing to prevent them rejecting new business.

However, the scale of switching isn't at a level yet to cause any policy changes. I have heard anecdotally about 1 switcher who was declined, but it was because when lender asked to see statements, due to timing of switches they had only made 4 repayments in 6 months so couldn't prove affordability.
 
Seaniemed said:
Hi all, really interesting discussion on multiple switches. I'm due to draw down soon with BOI as a FTB, and can't seem to get an idea of roughly how much it would cost to switch to EBS approx. 3 months from drawdown.
Fixed for 3 years @3%
Amount 340,000

Has anyone any advice?
Click to expand...

This completely depends on the rate that EBS borrows at to fund your mortgage.

My (hard) experience is that they will not give you a breakage fee until you have actually drawn down the mortgage.

If you intend to do a lot of switching then pick one-year rates.
 
If your only taking out your first mortgage now, I would be surprised if anyone allowed you switch as you've only 3 mths repayments.
 
Seaniemed said:
Hi all, really interesting discussion on multiple switches. I'm due to draw down soon with BOI as a FTB, and can't seem to get an idea of roughly how much it would cost to switch to EBS approx. 3 months from drawdown.
Fixed for 3 years @3%
Amount 340,000

Has anyone any advice?
Click to expand...
Hi Seaniemed,
If you're planning on switching after 3 months, do not get a fixed rate with BOI, go with a variable rate. Otherwise you will be charged a breakage fee when you switch, this can be significant.
If they ask why you want a variable rate, say you plan on making lump sum / capital repayments. They may suggest a split loan, but go with variable only..
 
John Locke said:
If you're planning on switching after 3 months, do not get a fixed rate with BOI, go with a variable rate. Otherwise you will be charged a breakage fee when you switch, this can be significant.
Click to expand...
A 1 year fixed rate would be better advice.
The SVR is 4.5%
A new borrower will not be able to switch anywhere after just 3 months.
The break fee for a 1 year fixed would not be more than the saving between fixed and SVR rates.
 
RedOnion said:
A 1 year fixed rate would be better advice.
The SVR is 4.5%
A new borrower will not be able to switch anywhere after just 3 months.
The break fee for a 1 year fixed would not be more than the saving between fixed and SVR rates.
Click to expand...

Fair point, yes, I didn't think of that.
BOI SVR is pretty scandalous. It is always worth asking for a discount, there is some discretion. I got a discount with BOI, simply by asking and saying that I was looking at other mortgage providers.
 
You must log in or register to reply here.
Back
Top