Fixed Rate Poison Chalice

F

fuzzyduc

Guest
There's a rising surge of media attention and political attention urging banks to cut a deal on fixed rate mortgages.
The Connacht Tribune has written about it this week, the Irish Examiner features a front page article on Thursday 16th, Prime TIme, etc
Thankfully!
I know the majority feel a contract is a contract, but as Christy Moore sometimes sings 'only the very safe can talk about wrong and right'.

I'm going to visit my local TD and minister' clinics tomorrow, I feel at this point its my only chance. Does anyone know of what else I could do?
If anything is to be done, we'll have to do it now.


 
You had a choice , nobody forced you on to a fixed interest rate. It amazes me how a lot of individuals didnt take the risk and went for what they thought was security in the knowledge that every payment mortgage payment they'd make over a period of time would be fixed. They are not losing anything because their payments have stayed the same. No use crying now because the rates have tumbled. Could easily have gone the other way and if they had , would people be contacting their local TD's to come off the fixed rate? , i dont think so!
 
Just a thought, but it seems everyone on a variable rate thinks those on a fixed rate are whining children and everyone on a fixed rate thinks those on a variable are smug and judgmental. Perhaps that is a bit broad, but it seems these sentiments are repeated over and over again on these boards. I do think a contract is a contract. We are fixed at 5.25 for another year and a half. It does sting every time friends and colleagues whoop and holler at yet another interest rate cut, especially when things are SO tight. But I sigh and think: that's life!
 
fuzzyduc said:
There's a rising surge of media attention and political attention urging banks to cut a deal on fixed rate mortgages.
The Connacht Tribune has written about it this week, the Irish Examiner features a front page article on Thursday 16th, Prime TIme, etc
Thankfully!
I know the majority feel a contract is a contract, but as Christy Moore sometimes sings 'only the very safe can talk about wrong and right'.

I'm going to visit my local TD and minister' clinics tomorrow, I feel at this point its my only chance. Does anyone know of what else I could do?
If anything is to be done, we'll have to do it now.
Click to expand...


I find this a strange logic to be honest ....

a) You make a decision to enter a fixed rate agreement and now that rates have dropped you want the country to rise up in arms to get you out of this contract?

b) Would the same logic apply if rates had gone up and the 'banks' called on Prime Time, Politicians etc to break the agreement - I think not ...

c) Applying your logic, those that have bought cars, houses etc over the past couple of years (all of which have now fallen in price/value) should have a comeback to those they bought these items from ...

d) what most media commentators, politicians etc seem to forget (or don't understand) is that when banks enter fixed rate agreements they protect their position by entering a contra fixed rate agreement in the money markets - so if deals has to be broken there is an actual cost to break same, which is the cost that is being passed on to the individual. Again what many seem to appear to miss is that if the politicians force the banks to do a deal (and in turn take a financial loss) on this issue, if one follows the popular thought process at the moment that all bank's will be nationalsied, the ones that ultimately will pick up the cost is the Taxpayer!

e) So fuzzyduc - I'm sorry, you'll have gathered I fundamentally disagree with your view, request and logic on this issue.

Just to let you know - I happen to have part of my mortgage on what is now an expensive fixed rate...

Regards,

BM
 
Oh I hear you, you could say I made my bed by choosing this rate and now I should just face the music. Problem is I'd be a fool to do that because it means loosing my home.
Do you think I should just give up so?!
I am not whining, I'm fighting for my home now because I was mis-sold a product my bank when those in the know had forecast a downward trajectory in rates.
I draw your attention to the following quoted from senior banking economists in Ireland at the time these 'attractive fixed rate offers' were solicited:


Article published 8th August 2008 - www.finfacts.ie –

“ The latest PMI readings for both the manufacturing and services sectors point to GDP growth more or less stagnating this summer.
The ECB, then, is facing what could be described as something close to stagflation in the eurozone economy.
This will make it difficult to hike rates any further. Indeed, the HICP rate is likely to fall back next year as the upward pressure eases on food and energy prices. With the economy likely to have weakened considerably over the course of 2008, we could well see the ECB cut interest rates in 2009, provided inflationary pressures abate.' http://www.finfacts.ie/irishfinancenews/article_1014414.shtml



Article published 22nd August 2008 - Ulsterbank - Senior economist Simon Barry –
http://www.ulsterbank.com/content/g...s/downloads/UB_Euro_Monthly_Update_Aug_08.pdf

“However, the weaker economic activity is, the less will be the need for the ECB to follow up the July hike with further action. The
upside risks to the outlook for official interest rates for the remainder of this year are fading fast and it is looking more likely that
the next move in ECB rates will be down. Our July Focus on Markets penciled in a 0.25% cut in the second quarter of next year, but
if the economy continues to deteriorate at the current rate, then the chances of a cut coming earlier is likely to rise.
Market interest rate expectations have shifted in accordance with the perception that the August ECB press conference was on the
dovish side, with the large declines in oil and other commodity prices also a contributing factor. From pricing in 1-2 more hikes
about a month ago, the market is now factoring very little chance of another increase this year, and is discounting a rate reduction
by Q2. This reappraisal has sparked a massive decline in long-term borrowing costs, with 5-year rates down some 60bps over the
past 4 weeks. In our view, this move lower in long-term rates has fundamental support to the extent that it represents a correction
from overly aggressive ECB rate expectations. However, the market may find it difficult to push much lower from current levels in
the short-term given lingering concerns at the ECB on the inflation situation. Furthermore, at around 4.65%, 5-year rates are once
again back below short term variable rates (e.g. 3-month Euribor) which remain stubbornly high at close to 5%, thus enhancing the
attractiveness of hedging long-term debt”.

And finally my own banks published article –
14th August 2008 - IIB Bank - Austin Hughes - Chief Economist –
[FONT=&quot][broken link removed]
“If the trajectory of Eurozone economic growth develops broadly along the lines we expect, it would imply a profile not hugely different to that seen in the 2001/2 downturn. In that earlier episode, the ECB moved rates aggressively lower”.[/FONT]

This really makes me angry to think that, although still in the dark as to the size of the economic crisis, they knew these rates were not an 'attractive offer' in any way.

Again, I'm not whinging, I'm trying to keep my home.
 
fuzzyduc,

a) last thing I would wish for you is to lose your home ...

b) for someone who has the ability to research (based on your previous post) I'm amazed that you came to the conclusion to fix your rate when you did ..

c) I've answered previous posts on the eternal debate as to whether to fix or not, and I really believe it's down to personal choice

http://www.askaboutmoney.com/showthread.php?p=808372#post808372

d) you have introduced a new element in to your last post which is the 'mis-selling' element - this I would see as a serious issue, and not one that I could comment on here as I wasn't there to witness the interaction that took place when you/they agreed the rate/term etc. However, if you feel that this is what happend then you should persue this issue seperately - I would still contend that if the majority of fixed rate agreements were enetered in to willingly then they should stand.

Whatever happens I wish you, and yours all the best and sincerely hope you do not lose your home.

Regards,

BM
 
LadyJane said:
Just a thought, but it seems everyone on a variable rate thinks those on a fixed rate are whining children and everyone on a fixed rate thinks those on a variable are smug and judgmental. Perhaps that is a bit broad, but it seems these sentiments are repeated over and over again on these boards. I do think a contract is a contract. We are fixed at 5.25 for another year and a half. It does sting every time friends and colleagues whoop and holler at yet another interest rate cut, especially when things are SO tight. But I sigh and think: that's life!
Click to expand...

+1

we got our mortgage at the end of 2008 and fixed at the same rate mentioned (2 years). We had been through a long mortgage process (to say the least!) and we were happy to get it when we did. We knew exactly how much we needed to repay every month and tbh i'm satisfied with this at the moment. We can budget around that and when the fixed term finishes we'll take it from there.
 
Can I get 10% interest on my deposit account too please?

I'm already paying 25% DIRT to subsidise mortgage holders who get mortgage interest relief. I think I'm entitled to it.

It's all about that sense of entitlement.

Thanks.
 
BM,

I'm pretty useless normally when it comes to economics. Unfortunately its taken me months to get to grip with the full picture, with help! Its a lesson now well and truly learned, don't trust your bank, find out for yourself.
I've only just found how useful the finfacts website is, I'd recommend it to everyone who is struggling to get through this situation.
I am ashamed that I acted out of desperation and misleading banking advice, but now I know how and where to research my choices, alas too late in this instance.

I think another point that I feel is valid, is that the punitive Break funding equations issued were devised at more stable times for a stable market. I really don't see how they can still function given the seriousness of the decline.

Negative Equity + Avalanche of interest rate drops + loss of employment potential --- this is a vastly different landscape, I really feel the fees do not equate anymore?
Now I understand now that my bank owes this to whomever they purchased the rate from, but is there not favourable refinancing available to the bank with bottom ECB rates? I'm still trying to get my head around that part.

I know I'm not the only one in my situation and I feel its important people know they should seek help. It simply isn't right to close doors when people post looking for solutions, on this forum you can never know the full extent of the situation.

camlin90,

I assure you I am not reacting to Variable Rate mortgage holders with Selfishness or a sense of entitlement.
Perhaps I'm in the wrong forum.

FD
 
fuzzyduc,

The hard reailty is that the bigger the drop in rates the bigger the break fee will be, as no one will buy the original fixed rate deal in the current climate (from either your bank or you).

Sorry you feel I was 'closing the door on you' - I didn't intend to I was only giving my view - which I still hold...

One thing has been confusing me re your original posting ...

You say you may lose your home because you can't get out of the fixed rate now, however if rates had stayed the same or even increased, you'd have wanted to stay on that rate ..... so something else must have entered the equation to cause your current situation?

Let's assume for a moment that your bank can show/prove they didn't mis-sell you the product (I'm not making a judgement here, just assuming for the puposes of my proposal), have you looked at a) what the level of penalty would be and then b) seeing what it would mean to your repayments if you added this to your mortgage but at the lower rates that are available now. This would mean paying interest on this amount for the remaining term of the mortgage, but if it were to mean you not losing your home I think it may be an option to look at. Assuming you opt for a variable mortgage you could then reduce by lump sum(s) in the furture if your circumstances change.


Regards,

BM
 
The one thing that gets me is that the banks brought on this mess and the taxpayer has to pay levies and take cuts here and there to the extent where average earners go home with seriously less money, the government does not seem to care that their measures to save the banks due to their "toxic debts" puts huge pressure on mortgage holders and there seems to be nothing to help people with huge fixed interest rates. Sure Cowen said people are now back to what they earned in 2004 - which is all fine if you didn't buy your house between then and now. I wonder is the government looking at the amount of house reposessions and debt that people will accumulate due to the banks's mess. This is what gets me. Sure everyone knows when they entered a fixed agreement that they'd be stuck with it. What noone could have forseen is that we would have to take a massive income hit which makes meeting these mortgage demands somewhat challenging. I'm lucky as I fixed at a reasonable rate and I've only got a few more months to sit out, but I really feel for people who were scared into fixed rates the way the rates where shooting up and are now punished for the banks' ill investments by the government who clearly only focuses on getting the banks off the hook. How is the economy to be stimulated if noone has any money spare to buy anything?
 
fuzzyduc i do feel for your situation, but making deals for people that did fix rates, i dont ever see happening.

For me i MADE the choice not to fix when my initial 1 year FTB fixed period was over. My bank wrote to me with about half a rainforest of information which i actually read through before i made my decision. Honestly, i didn't understand half of it, but bascially if you fix thats your payment, if you dont you take the chance the interest rates dont go sky high. It's not that hard to understand.

So if people get a deal on high fixed rate mortgages would it be fair that the ones on variable get a discount as well. Even on the variable rate it still hard for me to make my repayments, it's a struggle each and every month.

If i had of fixed i probably would of lost my house by now, which is a very scary thought. I really do hope that you manage to sort things out, and for people that are on fixed or variable rates where their wages have been reduced through no fault of their own and are struggling to make the repayments, yes there should be some help for them but not a bail out.
 
ZzzzzzzzZZZZZZZZZZZZZZzzzzzzzzzzzzzz

Tonights main event : Fixed v Variable...
 
i have a fixed rate mortgage and acknowledge that it was my own choice not to go for a variable. i made an informed decision about what was best for me at the time. if rates were now at 10% and every variable rate holder wanted to get on a fixed rate of 5% do you think the banks should do that, of course not. you made your decision people, its no ones fault except your own
 
I agree with what you're saying spursfan1234, but it kills me that we're taking a massive hit in income due to levies and what not else, to rescue the economy and bail out the banks, and the government slashes mortgage interest relief and slashes childcare, etc etc, and your average public joe who last year could happily afford his fixed rate faces major difficulties now. When I fixed my rate at 4.65 I did it because I was worried the rates would get higher than i could afford, but I did not envisage that I would loose earnings to the extend I have. Luckily, I only have to ride it out till December and i can manage (and I'm in year 4 and have no kids). I just feel that the government has not thought about people with 2006 mortgages and how they are supposed to manage on a 2004 income. All I ever hear is that people have to adjust their lifestyle and we have to tough it out, etc, etc. All true, but I don't get the impression that at any stage they thought about families who might be at risk of losing their homes now due to the measures they took.
 
Petal said:
I just feel that the government has not thought about people with 2006 mortgages and how they are supposed to manage on a 2004 income.
Click to expand...

There's a lot worse off out there, how about the people with mortgages and no income?

In any case the banks remain privately owned and cannot be forced to tear up legal contracts by government.

If they do become nationalised you can then lobby government.

Personally I think that there are better ways to address the issue of people in trouble with their mortgages than canceling fixed rates.

For starters it would help those in no difficulty whatsoever whilst those who cannot even pay their variable mortgages would be ignored.

There seems to be an expectation amongst many fixed rate mortgage holders that the government should ride in and solve everything. Between this and the moratorium on repossessions, people are postponing making making difficult desicions.

If you've got a house full of kids and are struggling to make mortgage payments then you are in probably genuine need of help but there are plenty of people on fixed rates who want a free dig out.

There are lots of options for some such as renting a room, rescheduling payments and in the worst case scenario selling the house and downsizing. Before anyone jumps down my throat (and I know there will be plenty of examples) I acknowledge that these may not be options for families who have already outgrown the house they are in. Canceling fixed rate mortgages, however, is not a sensible way of targeting the limited resources we have to ensure those most in need get them.
 
fuzzyduc said:
Oh I hear you, you could say I made my bed by choosing this rate and now I should just face the music. Problem is I'd be a fool to do that because it means loosing my home.
Do you think I should just give up so?!
I am not whining, I'm fighting for my home now because I was mis-sold a product my bank when those in the know had forecast a downward trajectory in rates.
I draw your attention to the following quoted from senior banking economists in Ireland at the time these 'attractive fixed rate offers' were solicited:


Article published 8th August 2008 - www.finfacts.ie –

“ The latest PMI readings for both the manufacturing and services sectors point to GDP growth more or less stagnating this summer.
The ECB, then, is facing what could be described assomething close to stagflation in the eurozone economy.
This will make it difficult to hike rates anyfurther. Indeed, the HICP rate is likely to fall back next year as the upward pressure eases on food and energy prices. With the economy likely to have weakened considerably over the course of 2008, we could well see the ECB cut interest rates in 2009, provided inflationary pressures abate.' http://www.finfacts.ie/irishfinancenews/article_1014414.shtml



Article published 22nd August 2008 - Ulsterbank - Senior economist Simon Barry –
http://www.ulsterbank.com/content/g...s/downloads/UB_Euro_Monthly_Update_Aug_08.pdf

“However, the weaker economic activity is, the less will be the need for the ECB to follow up the July hike with further action. The
upside risks to the outlook for official interest rates for the remainder of this year are fading fast and it is looking more likely that
the next move in ECB rates will be down. Our July Focus on Markets penciled in a 0.25% cut in the second quarter of next year, but
if the economy continues to deteriorate at the current rate, then the chances of a cut coming earlier is likely to rise.
Market interest rate expectations have shifted in accordance with the perception that the August ECB press conference was on the
dovish side, with the large declines in oil and other commodity prices also a contributing factor. From pricing in 1-2 more hikes
about a month ago, the market is now factoring very little chance of another increase this year, and is discounting a rate reduction
by Q2. This reappraisal has sparked a massive decline in long-term borrowing costs, with 5-year rates down some 60bps over the
past 4 weeks. In our view, this move lower in long-term rates has fundamental support to the extent that it represents a correction
from overly aggressive ECB rate expectations. However, the market may find it difficult to push much lower from current levels in
the short-term given lingering concerns at the ECB on the inflation situation. Furthermore, at around 4.65%, 5-year rates are once
again back below short term variable rates (e.g. 3-month Euribor) which remain stubbornly high at close to 5%, thus enhancing the
attractiveness of hedging long-term debt”.

And finally my own banks published article –
14th August 2008 - IIB Bank - Austin Hughes - Chief Economist –
[FONT=&quot][broken link removed][/FONT]
[FONT=&quot]“If the trajectory of Eurozone economic growth develops broadly along the lines we expect, it would imply a profile not hugely different to that seen in the 2001/2 downturn. In that earlier episode, the ECB moved rates aggressively lower”.[/FONT]

This really makes me angry to think that, although still in the dark as to the size of the economic crisis, they knew these rates were not an 'attractive offer' in any way.

Again, I'm not whinging, I'm trying to keep my home.
Click to expand...

You are whinging ....why dont you just man up and accept the contract you signed, I'm sure if the variable rate went up you wouldnt be here complaining
 
fuzzyduc - why on earth would you take out a fixed rate mortgage based on what people in a bank said. no one can predict the future of rates, no one could have predicted they would so low now and so quick. you made your choice based on what someone else said, this is a sure fire way to financial riun

its a bit simplistic and nieve to base something as critical and expensive as house repayments on a strangers advice, in all fairness.
 
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