Discussion: Should customers be let out of fixed rate mortgages?

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babybisi04

Guest
"of course"? That is nonsense. Take the time to read the rational responses to some of the emotive, tabloid headlinism, magic wand waving, self absorbed, naive, irresponsible, clueless ravings of some people who simply will not accept responsibility for their own actions. And I'm not referring to the Banks here!

mf
we all have our right to different opinion, and guess wat u dont av to agree with mine. it's a free world

if the banks can make mistakes and went into debts, show me one man who is perfect and i'll rest my case
 

minion

Frequent Poster
Messages
504
we all have our right to different opinion, and guess wat u dont av to agree with mine. it's a free world
Its not really.
The banks have to charge you what it costs them for someone to exit a fixed rate deal. There is no opinion involved, just costs.
 
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dublincelt

Guest
Just as a follow up. I have found the document in question outlining IIB changing me from Fixed to Variable in May 08. Here it is word for word,

Dear Sirs,

We refer to the above and in particular to the Fixed rates condition of our Letter of Offer dated 10/04/2008 Prior to negotiating the Loan Cheque, we would be obliged if you could advise the Borrower, that their Variable rate has changed to 5.45


Many thanks for your assistance.


Yours Sincerely,


NEW BUSINESS DEPARTMENT

That is the letter IIB sent to my solicitor AFTER I had paid out over €12,000 of a deposit. I had signed up to a fixed rate yet they knew they could force me to variable due to the vulnerable stage of my contract negotiations with the developer.

Then less than three weeks later I get the following letter,

Dear xxxxxxx

We wish to confirm as announced by IIB Homeloans in the press on the 24th May 2008, the standard variable rate has been increased by 0.20% and your revised interest rate is 5.65% etc…….

This went on for several months until I eventually fixed at a revised rate of 5.99%.

My main issue is that I was broken from a fixed rate by the bank when it suited them. However when I try to do the same I am quoted the €14,000,


Do I have a possible case to argue with the regulator here?
 

minion

Frequent Poster
Messages
504
Just as a follow up. I have found the document in question outlining IIB changing me from Fixed to Variable in May 08. Here it is word for word,

Dear Sirs,

We refer to the above and in particular to the Fixed rates condition of our Letter of Offer dated 10/04/2008 Prior to negotiating the Loan Cheque, we would be obliged if you could advise the Borrower, that their Variable rate has changed to 5.45


Many thanks for your assistance.


Yours Sincerely,


NEW BUSINESS DEPARTMENT

That is the letter IIB sent to my solicitor AFTER I had paid out over €12,000 of a deposit. I had signed up to a fixed rate yet they knew they could force me to variable due to the vulnerable stage of my contract negotiations with the developer.

Then less than three weeks later I get the following letter,

Dear xxxxxxx

We wish to confirm as announced by IIB Homeloans in the press on the 24th May 2008, the standard variable rate has been increased by 0.20% and your revised interest rate is 5.65% etc…….

This went on for several months until I eventually fixed at a revised rate of 5.99%.

My main issue is that I was broken from a fixed rate by the bank when it suited them. However when I try to do the same I am quoted the €14,000,


Do I have a possible case to argue with the regulator here?

Was you it your loan OFFER they were talking about or your actual loan after you had drawn it down.

Did you draw down your loan on a fixed or variable rate (on the date you got the keys)?
 

darag

Frequent Poster
Messages
473
Fixed rates are based on the prevailing interest rates when you draw down the loan not when you get approval. It is these rates which determine the cost to the bank of offering a fixed rate and it would be impossible for banks to offer a fixed rate product if they had to tie themselves to a rate for a loan which may not be drawn down for months or longer. You would have been offered the benefit if rates had fallen.

If it didn't work like this, then effectively the customer would be in receipt of a free option on interest rates since they could wait and chose whether to take out the loan or not. This couldn't work; if interest rates dropped you would ignore the earlier loan offer and would have no problem getting a lower fixed rate from some-one else or even the same provider; if they rose, you could accept the offer but the bank would lose money. One or other is likely to happen and both disadvantage the bank so there would be no incentive to offer such a product.

This should have been made clear to you. I'm pretty sure this condition would have been stated in the terms and conditions.
 
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dublincelt

Guest
Was you it your loan OFFER they were talking about or your actual loan after you had drawn it down.

Did you draw down your loan on a fixed or variable rate (on the date you got the keys)?
As far as I am aware it was the loan offer and the cheque was issued on the condition that I switch to their variable terms. At no point have I stated otherwise. So my point remains, I selected IIB as my mortgage provider due to their rates in April08. However when the cheque was sent to my solicitor they sent the first letter above with it. I had already paid out my deposit so how else was I to proceed. I signed no other documentation apart from the original paperwork with the broker in April. And then disastrously with the letter IIB sent out some months later offering me a new fixed rate term.
 

csirl

Frequent Poster
Messages
2,162
Financially speaking, a fixed rate mortgage is a luxury item. They are usually more expensive than variable rate mortgages in the long term. This is because they include a risk premium on top of the rate. Fixed rate customers pay the bank to take a financial risk on their behalf. Asking anyone, bank or otherwise, to take a financial risk on your behalf is always expensive. Anyone who opted to take a fixed rate mortgage would have been easily able to afford a variable rate. You may introduce the argument of tight payments stress testing etc., but the difference in the rates at the time of offer is usually large enough that it largely erodes what would be the stress test margins on the variable rate anyway thus making it insignificant.

So, the people who are advocating the banks, using taxpayers money, to get them off a fixed rate mortgage are those who's disposable income was such that they could afford to buy the luxury product of a fixed rate mortgage at a time when the average punter could only afford the cheaper variable or tracker rate? Any they want the average punter who cant afford their luxury to pay for it?
 
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Robin Banks

Guest
Like most things in life, it's very simple. You take a fixed rate mortgage, you're betting that interest rates are going up. You stay variable you're betting that they're going down, or that the premium for going fixed is not justified.

I bet on Arsenal to beat Man U last Saturday. Can I be bailed out too? I made a bad call so obviously it must be someone else's fault. That's how the world works, right?
 

bond-007

Frequent Poster
Messages
3,175
The irony is that there are now people on sub prime mortgages getting rates lower than those that fixed last year..
 
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Robin Banks

Guest
All mortgage lending in Ireland is subprime.

The collateral is massively overvalued. The terms are too long. The income multiples are too high. The margins on lending are negative.

All our banks are insolvent and getting worse.

If you need any evidence as to how our banks are both bankrupt and insolvent it is here

http://www.fxcentre.com/news.asp?2416455

Mortgage standard variable rate 2.25% Deposit account 2.85%. Not forgetting all the tracker mortgages the idiots gave out. Imagine guaranteeing your customers you'll sell them bricks at a 0.7% margin over one supplier's price for the next 35 years when you don't buy your bricks from that supplier. You couldn't make it up how thick the Irish Bankers are.

No wonder the government are forced to take over.
 

csirl

Frequent Poster
Messages
2,162
All mortgage lending in Ireland is subprime.
This is a bit of a sweeping statement. The majority of mortgages in Ireland are repaid in full with a very low default rate in comparison with many other countries. One aspect of Irish lending which makes it less "sub prime" than many western economies is that the debt is not restricted to the value of the property - even if a mortgaged property is sold in negative equity, the recipient of the loan is still liable to pay back everything borrowed and, the vast majority do.

On residential property, we seem to have escaped the NINJA loans of the USA and the mortage based on rental yield rather than property value that is common in the UK.
 
R

Robin Banks

Guest
On residential property, we seem to have escaped the NINJA loans of the USA and the mortage based on rental yield rather than property value that is common in the UK.
Mortgages based on rental yield would be fantastic in Ireland. Would've stopped the bubble in its tracks.


Rents are and always were bounded by incomes which are flat or declining in real terms for the last decade. However mortgages went into the stratosphere based on nothing but imaginary future projections of property prices based on a linear continuation of bubble gains.

A classic asset bubble. Just like the NASDAQ in 1999-2000.

NASDAQ broke 5000 in March 2000. Sitting on 1700 today nearly 10 years later.

I'm quite confident the price of an average house in Ireland will be a lot less in 2016 than it was in 2006. A long slow painful deflation of imaginary debt based "wealth" beckons.
 

minion

Frequent Poster
Messages
504
As far as I am aware it was the loan offer and the cheque was issued on the condition that I switch to their variable terms. At no point have I stated otherwise. So my point remains, I selected IIB as my mortgage provider due to their rates in April08. However when the cheque was sent to my solicitor they sent the first letter above with it. I had already paid out my deposit so how else was I to proceed. I signed no other documentation apart from the original paperwork with the broker in April. And then disastrously with the letter IIB sent out some months later offering me a new fixed rate term.

Im afraid you dont have a case. You need to understand the terms of your contract a bit better.
 

csirl

Frequent Poster
Messages
2,162
Mortgages based on rental yield would be fantastic in Ireland. Would've stopped the bubble in its tracks.
Dont know how you can say this. Mortgages based on rental yield were where people borrow more than the purchase price of the property on the basis that the theoretical maximum rental yield of the property was sufficient to make the repayments on the higher mortgage. The extra money above the purchase price was usually used to invest in other property. I just cant see how getting a 120% or 130% mortgage is a good idea - automatically in negative equity from day 1.

What's even worse about these rental yield mortgages is that the maximum rental yield used always assumed 100% occupany and that the landlord was able to get planning permission to subdivde the house into several bedsits (the HMO phenom in the UK). The reality is that 100% occupancy is never achieved and that through failure to get PP or because they wanted to maximise their borrowings, the properties usually ended up with less bedsits that stated in the original mortgage application.

The incredible thing about this is that many of the major banks in the UK routinely gave rental yield mortgages on potential HMO properties which had absolutely no chance of getting PP to be coverted into HMO. How wreckless is that?
 

minion

Frequent Poster
Messages
504
PLEASE SIGN PETITION www.actiononfixedmortgages.com. AIM is to get the government to take notice and do something about charges of getting out of a fixed mortgage.

I was under the impression they had taken notice and surprise, surprise the banks have no choice but to charge what they charge for a break out.
So then the government decided to look into publishing the formulae behind the costs.

You can get these formulae now, but nobody wants to know.
 

ardmacha

Frequent Poster
Messages
238
The government should absolutely not intervene. Irish banks are uncapitalised and the government is having to underwrite them. To excuse a substantial part of the interest payments due to these banks just means that the rest of us taxpayers have to take the hit. Taxpayers who don't own homes at all in many cases.

A fixed rate mortgage means fixed payments. If rates go up this is a good deal, if rates go down it is not so good. But that is the risk you take, you can't expect other taxpayers to pay your interest for you.
 
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