Ex INBS mortgage now with Pepper - switch possible?

R

Resolution

New Member
Messages
7
Thanks @Mark Coan for raising this issue here. I have outlined my situation below...the data may be of interest, let me know if I should start another thread for advice?

I have a performing mortgage with Pepper, no arrears. My interest rate is due to increase to 6.65% from start of April and I’m hoping to switch providers. I was advised previously by a broker that I’d be wasting my time trying to switch providers given my income and the structure of the loan. Details are below, I’d appreciate any advice. Thanks in advance.

Amount outstanding: €298,438
Current property value: €350,000
Years remaining: 18
Loan To Value : 85%
Current interest rate is 5.65%,
Monthly repayments : €2248.56
Security on the mortgage: property valued at €750,000
My current income (greatly reduced since I first took out the mortgage in 2006, I’m a sole trader) : €40,000.
Additional info: My parents names are also on the loan, they are both retired, I am 50.
The property is my primary residence and also has rental income of €1960 per month; I realise this isn’t considered by lenders but adding for completion.
I have no other debt.
At the moment the only options I can see are to sell or try to switch to buy-to-let mortgage and move out? Interested to hear an informed perspective...thanks.
 
@Resolution

Which lender were you with originally?

I would argue that you should be allowed to avail of the rates offered by the originator of the loan.

I don't think that the Central Bank or government will enforce that, although I will continue lobbying them.

I think you should consider taking a complaint to the Ombudsman and let him decide if your interest rate is fair.

Brendan
 
@Resolution

Thanks for posting your details, from what you have shared I'm afraid you may be trapped with the fund you are with, due to the Central Bank affordability rules. The absolute highest possible is 4.5 X Gross income, this would get you to only €180,000. Unfortunately the rules only allow earned income, so the rent as you say doesn't count.

A switch to buy to let is unlikely to help either as the rent isn't covering the repayments and BTL rates are also 5%+ and rising.

It's probably worth having a full detailed consultation with a broker, but it would seem to me you may be one of the many 'mortgage prisoners' struggling with these rising rates. There are various routes that the government and regulator could pursue to help mortgage holders in your situation, but unfortunately there has been little or no concrete action on this to date.

In particular based on initiatives that have been implemented elsewhere I favour two ideas.
1) The regulator changes the CPC to include a modified affordability test for customers reducing their repayments
2) The government introduces an equity grant scheme for customers with closed/'vulture' funds modelled on the first home scheme, that allows 'mortgage prisoners' to switch to the open market by bridging the gap in affordability.

In the meantime you probably have no other recourse than that suggested by Brendan above.

That said I really appreciate you sharing the details of your situation, as it does help those trying to highlight the issue and propose solutions for all those in a similar predicament.
 
Mark Coan said:
Thanks for posting your details, from what you have shared I'm afraid you may be trapped with the fund you are with, due to the Central Bank affordability rules. The absolute highest possible is 4.5 X Gross income, this would get you to only €180,000. Unfortunately the rules only allow earned income, so the rent as you say doesn't count.
Click to expand...
The CBI measure do not apply to switcher mortgages...
 
RedOnion said:
The CBI measure do not apply to switcher mortgages...
Click to expand...
I may be misunderstanding the comment, but unfortunately I believe there is no difference I'm aware of in how the CBI treats a new or switcher mortgage. Both the Loan to Value and Loan to Income limits are applicable, a switch is just a new mortgage. Usually this isn't that important as Value and income most times are similar from original to switch. However, in the case of the mortgages with Vultures this is much more common, as Income levels may have changed etc..
 
Mark Coan said:
I may be misunderstanding the comment, but unfortunately I believe there is no difference I'm aware of in how the CBI treats a new or switcher mortgage.
Click to expand...
Unfortunately your understanding is incorrect Mark. The legislation does not apply to switchers. Read the "exemptions" section of the statutory instrument.

But lenders have their own underwriting criteria.

If we want changes, we need to first understand the starting point.
 
RedOnion said:
Unfortunately your understanding is incorrect Mark. The legislation does not apply to switchers. Read the "exemptions" section of the statutory instrument.

But lenders have their own underwriting criteria.

If we want changes, we need to first understand the starting point.
Click to expand...
Thanks @RedOnion, I stand corrected I went and had a look at the SI,

Regulation 4 Exemptions These Regulations shall not apply to: (a) a new housing loan under which amounts are advanced by the lender to refinance the full amount outstanding under an existing housing loan, where the new housing loan is secured or to be secured on the same residential property as the existing housing loan, and the amount to be advanced under the new housing loan does not exceed the amount outstanding under the existing housing loan (whether or not the lender in respect of the existing housing loan and the new housing loan are the same).

In the case of @Resolution above it is therefore likely that it is the lender policy that stands in the way of the switch not the CBI LTI rule. In theory then a lender could offer a mortgage in this case based on their own assesment. In practice though I can't think of a case I've seen where they have gone beyond 4.5 X the LTI for a switcher so it probably doesn't help @Resolution.
 
Mark Coan said:
In the case of @Resolution above it is therefore likely that it is the lender policy that stands in the way of the switch not the CBI LTI rule. In theory then a lender could offer a mortgage in this case based on their own assesment. In practice though I can't think of a case I've seen where they have gone beyond 4.5 X the LTI for a switcher so it probably doesn't help @Resolution
Click to expand...
Looking at the specific case, because it's not unique.

LTI over 4.5x is unusual, but not impossible. But here, LTI doesn't matter, the issue is affordability.

Mortgage already runs to age 68.
Repayment would be c. 2,100 at 5% Interest.
Take home pay from 40k income is c. 2,740

It's only affordable because of the extra rental income.
 
Thanks @RedOnion, that makes sense. As I understand it the rental income isn't included in the affordability tests for a PDH. It's not intuitively obvious why this is, as it is included in the BTL affordability tests.

On the other option mentioned by @Resolution of converting to a BTL the issue would be the 6%+ BTL rates, the need to increase the rental and obviously the need to find alternative accommodation. The only advantage I'd see is you would be able to get a fixed rate, but there would seem to be too many trade offs for this to make sense.
 
Brendan Burgess said:
@Resolution

Which lender were you with originally?

I would argue that you should be allowed to avail of the rates offered by the originator of the loan.

I don't think that the Central Bank or government will enforce that, although I will continue lobbying them.

I think you should consider taking a complaint to the Ombudsman and let him decide if your interest rate is fair.

Brendan
Click to expand...
@Brendan Burgess
Thanks for your reply and apologies that I didn't respond sooner. I was originally with Nationwide so the orginator of the loan is gone. And yes, it is secured on 2 properties.

Thanks too @Mark Coan and @RedOnion for your input. I suspected my options for switching are limited but it's very helpful to have your feedback.

As suggested by Brendan, I will contact the Ombudsman, if only to have a voice.
 
Hi Resolution

Your case is unusual. The Irish Nationwide was a sub-prime lender, so it's not unusual that you are paying high rates now.

I don't think that the Ombudsman has any role here as your lender is gone from the market.

I think it would be worth an ex ptsb customer taking a case as they can argue that they should get the ptsb rates.

Your only course of action is to lobby politicians and the media and try to get some protection for borrowers whose lender has exited the market e.g. Euribor +3%.

Brendan
 
@Resolution as @RedOnion points out the issue here is affordability which is not an uncommon case as the goal posts on lending have moved significantly since 2008. To @Brendan Burgess point there are some potential political solutions such as introducing an equity based scheme similar to the first home scheme to top up affordability or introducing modified affordability tests for ‘mortgage prisoners’ which has been brought in by the FCA in the UK for example. That said there has been no policy or media coverage of these kind of measures in Ireland to date that I’m aware of, so this may be a long shot.
 
Mark Coan said:
@Resolution as @RedOnion points out the issue here is affordability which is not an uncommon case as the goal posts on lending have moved significantly since 2008. To @Brendan Burgess point there are some potential political solutions such as introducing an equity based scheme similar to the first home scheme to top up affordability or introducing modified affordability tests for ‘mortgage prisoners’ which has been brought in by the FCA in the UK for example. That said there has been no policy or media coverage of these kind of measures in Ireland to date that I’m aware of, so this may be a long shot.
Click to expand...
Thanks @Mark Coan. If the potential political solutions you mentioned are not yet in place, the only course of action available to me is that suggested by @Brendan Burgess i.e. lobby politicians and media?
 
Yes I think @Brendan Burgess is right on this. There are different potential political solutions possible, but you don't have to worry about which one is best, just highlight your case to the politicians and media to do something to address the situation. It's the government/regulators job to work out how to protect those who are at risk of potential market abuse due to market failure. Many others are in the same boat, the more noise they make the more chance of progress.
 
You must log in or register to reply here.
Back
Top