Has the Central Bank finally seen the light on mortgage rates?

Brendan Burgess

Founder
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38,690
I have been tilting at this particular windmill for years now. I have met the Central Bank on a number of occasions and they have repeatedly refused to do anything about it. And while they claimed that Irish rates were "somewhat higher" they more or less claimed that these were justified.


Deputy governor Ed Sibley blew away the spin of the bankers yesterday when he dismissed the claims of banks and their apologies that they have no choice but to charge sky-high mortgage rates here.

Mortgage interest rates in this country are twice the average level for the eurozone.

....

Banks here blame the fact they are required to set aside more capital than their eurozone counterparts when they issue a mortgage, due to high default levels.

But Mr Sibley has smashed that excuse.

He described the Irish mortgage market as "dysfunctional".

The deputy governor said Irish banks can lend profitably while charging rates as low as 2.25pc to new customers, but still charge often unaware existing customers up to twice that level.

"It's also true to say that Irish banks are determining that it's profitable to lend at somewhere between 2.25 and 3pc for new customers, but are continuing to charge 4.5pc for existing customers. So before there's too much complaint about capital levels driving interest rates, which is a factor, they also need to look in the mirror and make a determination as to whether they're treating and delivering for their customers in way that's sustainable for both the new and existing customers," he said.
 

Andrew365

Registered User
Messages
175
They do have to set aside more capital given the models they are approved to use. That is a fact, this is pointing out that they charge different rates between new customers and existing. The result would be the average of both. What about people on trackers? Should they then have to pay the same as new customers?
 

gnf_ireland

Frequent Poster
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1,392
I think part of this challenge is back to why customers on the 3.5% plus rates have not switched providers at this stage. If it is due to LTV in particular, and those above the Central Bank guidelines of 90% or 3.5 times income, then they could be considered a higher risk than new customers who meet the Central Bank guidelines.

If its down to pure apathy, or lack of trust or whatever, then this is a matter and I am not sure what the central bank or anyone else can do on this right now. You cannot force people to switch mortgages if they don't want to.

Most, if not all, of the those who qualify as a new customer (Central Bank guidelines) can switch provider if they wish to do so. They have the power to change banks behaviour by switching, and if sufficient numbers do, the policy will change pretty quickly.
 

Zebedee

Frequent Poster
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98
Given the difficulties and costs of repossession, the potential loss given default may be much higher than other markets. This further increases the capital required under the banks models. Effectively this pushes mortgage rates somewhat towards unsecured loan rates.
 

NoRegretsCoyote

Frequent Poster
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918
If its down to pure apathy, or lack of trust or whatever, then this is a matter and I am not sure what the central bank or anyone else can do on this right now. You cannot force people to switch mortgages if they don't want to.
Exactly, I have seen several times people here on AAM with low LTVs who pay the default variable of their provider of 4.5%.

A phone call and a cost of a stamp would see them save them hundreds a month.
 

Sunny

Frequent Poster
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3,595
Central Bank are getting very mouthy...Hear the one recently where they talking about wanting conduct standards being enforceable by law and the head of financial conduct in a speach basically said they would be would be looking for an early scalp to make an example of if they get it...Frightening stuff....

You would swear the Central banks themselves have been the beacons of good ethical behaviour themselves.....They had to be dragged into investigating the tracker saga and yet they turn around and accuse the banks of having to be dragging into doing the right thing.. Brendan, AAM, some media/TD's did more on that than the so called regulator.
 

Nermal

Frequent Poster
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88
Am I wrong or could the CBI not require the same rates for new and existing customers at the stroke of a pen?

If so, why are they not doing that instead of blathering?
 

Metatron

Registered User
Messages
42
Maybe, from examining the Banking sector behaviors to date, the Central Bank is starting to see through their propaganda on mortgage rates and see it is nothing more than a money grab.
 

Eureka101

Registered User
Messages
28
I took out my mortgage with a Bank ( NIB ) in 2007 and have ended up with a Vulture Fund ( Pepper.)
I have a performing mortgage and a favorable LTV of 70-75% yet Pepper have no facility or interest in reducing my rate from a scandalous 4.75%.
Pepper's standard response when asked about the possibility of reducing my rate is simply 'You'll need to fill out a MARP' form...

It is important to consider that for many people switching isn't an option as current financial situations may have completely changed since the mortgage was first taken out.
Its perfectly normal to buy the house then have kids which means that childcare now has to be factored into means testing and a possible reduction in one partners earnings to care for children to offset the childcare cost further. This is in addition to very tight CB rules on borrowing

Pepper and all other Vulture funds are somehow escaping the hard work being done by the Central Bank to improve the conditions of our dysfunctional market and to protect the consumer.

TRS support finishes next month also for many thousands of people who purchased during the boom. Our mortgages have become steadily more expensive since NIB & Danske sold out and we lost the opportunity to leverage our LTV. This is the type of scenario that adds to the dysfunctional scenario in our country, increases the chance of default and sucks disposal income from our country and gives to these Vulture Funds

The Central Bank and Government needs to get tough now and protect consumers like myself and many others.
 

Sunny

Frequent Poster
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3,595
Was your loan always performing? If it was, it is an interesting case study and one worth brining to politicians and media attention. There is a lot that the Central Bank can do around their lending rules to help people switch mortgages without increasing systemic risk.
 

Sarenco

Frequent Poster
Messages
5,764
TRS support finishes next month
Not quite. MIR reduces to 25% of qualifying interest next year but it won't be completely gone until the end of the year.

Have you tried to switch? I would have thought that being able to show that you have serviced a mortgage for 12 years, particularly at such a high rate, would be viewed very favourably by another lender.

Also, the CBI mortgage rules don't apply to switchers.
 
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gnf_ireland

Frequent Poster
Messages
1,392
I took out my mortgage with a Bank ( NIB ) in 2007 and have ended up with a Vulture Fund ( Pepper.)
I have a performing mortgage and a favorable LTV of 70-75% yet Pepper have no facility or interest in reducing my rate from a scandalous 4.75%.
Was your loan always performing? If it was, it is an interesting case study and one worth bringing to politicians and media attention. There is a lot that the Central Bank can do around their lending rules to help people switch mortgages without increasing systemic risk.
@Eureka101 If you have 12 years of solid repayments and a decent LTV, I would at least apply to the banks to see if they will offer you a mortgage, irrespective of the Income to Loan ratio. It is a switcher mortgage after all, and I think some bank would be able to do something, even if just to improve their switcher numbers for the year

But yes, this is the downside of being transferred to the likes of Pepper. If you had remainder with one of the mainstream banks you would be able to avail of a better rate at this point.

But I do think it would be a very interesting case study for the media, and one that is worth highlighting.

By any chance, are you in a by-election area?
 
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