Lenders must now tell you how they set mortgage rates

Discussion in 'The Fair Mortgage Rates Campaign' started by Brendan Burgess, Mar 2, 2017.

  1. Brendan Burgess

    Brendan Burgess Founder


    Attached Files:

  2. Brendan Burgess

    Brendan Burgess Founder

    Last edited: Mar 2, 2017
    I think that all Bank of Ireland customers who are paying 4.5% should write to the Central Bank thanking them for their great work on this and how protected they feel.

    What do we consider when setting our variable
    interest rates?

    i. We may change the standard variable rate at any
    time. Here is a list of the factors that may result in our
    changing our standard variable rates:
    • To reflect any change in our cost of funds (i.e.
    the cost of borrowing the money we use in our
    residential mortgage business in the Republic of
    Ireland), for example, caused by any change in
    market interest rates or by other factors outside of
    our control;
    • To reflect any change in the variable rates which
    mortgage lenders other than us charge on loans
    secured on residential property in the Republic of
    • To ensure we are competitive;
    • To encourage or promote fixed rates;
    • To enable us to increase the rate we pay to
    customers with deposit accounts in the Republic of
    Ireland to the level needed to retain their money;
    • To ensure that the amount we receive from
    borrowers will enable us to maintain a prudent
    level of reserves and/or to meet any regulatory
    requirements that apply to us;
    • To ensure that the amount we receive from
    borrowers will enable us to maintain long-term
    sustainability of our residential mortgage business
    in the Republic of Ireland;
    • To reflect any change in the costs we reasonably
    incur in administering borrowers’ accounts;
    • To reflect the risk to us that our customers will not
    be able to make their mortgage payments in full
    and on time. In measuring that risk we consider the
    general economy and the effects it has on the ability
    of customers to meet mortgage payments; and on
    the value of properties mortgaged to us to secure
    mortgage loans;
    • To reflect any change in your circumstances or in
    the economy as it affects you. For example, if such
    things make it more difficult for you to meet your
    mortgage payments or increase the risk of the loan
    to us;
    • To reflect any change in taxation which affects the
    profit we earn from our ordinary activities; and
    • To reflect a change in the law, or in any code
    of practice which applies to us, or a decision
    or recommendation by a court, ombudsman or
    Last edited: Mar 2, 2017
    MrEarl likes this.
  3. Brendan Burgess

    Brendan Burgess Founder

    Last edited: Mar 2, 2017

    KBC Bank Ireland Plc (“KBC”) Variable Rate Policy Statement as at 18/01/17
    Warning: We may change the interest rate on this loan. This means the cost of your monthly repayments may increase or decrease.

    What do we consider when setting our variable interest rates?

    We set and change variable rates by reference to a variety of factors;

    1. Cost of funds – To have funds available to lend, we must first raise these funds from sources such as deposits, borrowing funds from other entities within the KBC group or obtaining funding from the European Central Bank or other third parties. We incur costs in raising this funding.
    2. Operational costs – We incur expenses and overheads in the running of our business. These include but are not limited to items such as staff salaries, premises, information technology, professional fees and insurance costs.
    3. Credit risk – When we lend money to a customer there is a risk that the customer may not pay back the loan or the interest related to the loan. If the loan is not repaid KBC sustains a loss of income and incurs expenses in seeking to recover the amount of the loan from the customer.
    4. Regulatory obligations – We are obliged to maintain certain levels of capital and adhere to prudential rules set by the Central Bank of Ireland in accordance with requirements of the European Central Bank. We are also required to comply with regulatory requirements and statutory codes in operating a mortgage business, such as the Consumer Protection Code 2012 and the European Union (Consumer Mortgage Credit Agreements) Regulations 2016. We incur costs in complying with these legal and regulatory obligations. Further information in relation to these regulations and statutory codes can be found at www.centralbank.ie and www.irishstatutebook.ie.
    5. Market Conditions – We consider the external market within which we operate and various economic factors which can impact on the cost of operating the business.
    6. Commercial strategy – We consider our competitive position in the market, aligning it to KBC objectives which have been established for a sustainable profitable business and product offering.

    Variations and/or changes in the factors and criteria outlined above could result in changes to some or all of the variable interest rates offered by KBC from time to time.

    How do we make decisions when setting variable interest rates?

    When setting or proposing interest rate changes we determine what is reasonable and appropriate in the circumstances taking all the factors outlined above into consideration.

    All changes must be approved at the highest level of KBC through its Executive Committee which comprises the Executive Directors of KBC. Our Variable Interest rates are reviewed on a quarterly basis by the Executive Committee. They may also be reviewed by the Executive Committee when deemed necessary at a particular time. When we make a decision to alter a variable interest rate, affected customers will be notified of the change at least 30 days prior to the new rates coming into effect.

    Why do we have different variable interest rates?

    We currently offer variable interest rates using a risk based approach which considers the amount of the loan applied for relative to the value of the property over which it is secured (‘Loan to Value Variable Interest Rates’). We do however also have loans to which standard variable interest rates apply. The factors and criteria set out above are considered by us when amending Loan to Value Variable Interest Rates and standard variable interest rates.

    The interest rate applicable to the loan of an individual customer is determined by that customer’s category of loan. The relevant category of loan for interest rate purposes is determined by us by reference to one or more of the following:-
    1. The Loan to Value percentage calculated at the drawdown of the Loan or, when agreed with us, recalculated during the term of the Loan based on an updated valuation.
    2. The date of drawdown of the loan which is relevant as on that date you become an existing customer.
    3. The use of the property by the borrower is either as a principal private residence or an investment property (buy-to-let property). If the use of the property changes over the term of the loan you must advise us.
    4. The type of customer the borrower is:

      • Namely whether the Borrower has drawn down the loan whereby he/she is an existing customer of the Lender.
      • Namely whether the Borrower has not yet drawn down the loan whereby he/she is a new customer of the Lender.
    5. If a borrower requests a variable rate loan or requests that the rate of interest on all or part of a variable rate loan is to be fixed for any period.
    As the factors and criteria set out above will impact different categories of loan to a greater or lesser extent from time to time, we may, when setting or changing variable interest rates decide to apply different variable interest rates to different categories of loan.

    We may also decide based on the factors set above to amend one type of variable interest rate (e.g. our standard variable rate) but not another type of variable interest rate (e.g. our Loan to Value Variable Interest Rate).

    Could you get a different type of interest rate or a lower interest rate?

    We urge all of our customers to consider their mortgage options on a regular basis. There are several options available to customers who wish to avail of a lower interest rate.

    Customers are entitled, with our agreement, to fix the interest rate on a loan for a period of time (usually 1, 2, 3 or 5 years). Fixed rates may be lower than variable interest rates. During the fixed rate period however customers who choose a fixed rate will not benefit from reductions which may apply to variable interest rates, however they will benefit compared to those on variable rates if variable interest rates increase. If the loan is redeemed either fully or partially during the fixed period, a break funding fee may be applied.

    If a customer has a KBC Current Account he/she may avail of a discount, currently 0.20% on the applicable mortgage interest rate if the loan is for a principal private residence. In order to avail of this discount, customers are required to mandate their salary to their KBC Current Account and are required to pay their KBC mortgage by Direct Debit from their KBC Current Account. This offer is available to borrowers whose loan is in respect of their principal private residence only and is not available for loans for investment properties. It should be noted that if a customer ceases to meet any of the required conditions the discount will no longer apply. Further information on this discount and the terms and conditions that apply to same are available on the KBC website – www.kbc.ie/currentaccountmortgage.

    KBC offers a range of variable and fixed rates based on the amount of the loan relative to the value of the property over which it is secured. These rates can vary for new and existing customers. It is possible for an existing customer to avail of new business rates which may provide a reduction in the interest rate applicable. This offer is available with respect to loans for principal private residences only. To avail of the offer an existing customer is required to obtain an up to date valuation of the principle primary residence. Further information including an application form, a list of approved valuers and the terms and conditions applicable are available on the KBC website at www.kbc.ie/existing-customers/pdhoffer.

    Information on all interest rates currently offered by KBC is available on our website, www.kbc.ie/our-mortgage-rates. We encourage our customers to contact us if they consider that there may be a better offer available for them, by phone on 1800 93 92 44 or by e-mail to customerservices@kbc.ie.
    This document is subject to change and notification of any changes will be provided by KBC. The current version of this document can be found on www.kbc.ie.

    Attached Files:

    Last edited: Mar 2, 2017
  4. Brendan Burgess

    Brendan Burgess Founder

  5. Brendan Burgess

    Brendan Burgess Founder

    Ulster Bank confirms the fair treatment of existing customers:

    "Ulster Bank has a policy of offering the same current products to both existing and new customers subject to certain criteria. This means that if you want to change to a new product, you can choose from the same product range as new customers, because treating customers fairly is important to us. However this does not mean that we will automatically move existing customers to a new deal.

    From time to time Ulster Bank may change the variable rate products which we offer; however this will not have any impact on existing variable rate customers, except that they will be able to choose to switch to any of the new products for which they meet the criteria."

    Also, they link all mortgage rates to a margin above or below their SVR. So if they change their SVR, all customers will get that change.
  6. cremeegg

    cremeegg Frequent Poster

    Surely this is almost the definition of a Cartel.
  7. Brendan Burgess

    Brendan Burgess Founder

    It's in all the other ones I have looked at as well.

    I don't think it indicates a cartel. It indicates that they respond to the market.

  8. Gushering

    Gushering New Member

    Got my letter in the post from BOI yesterday. Biggest waste of time reading it (and presumably even more expense posting it to me). It doesn't really make a whit of difference to anyone.
  9. Gerry Canning

    Gerry Canning Frequent Poster

    Our so kind Central Bank permits such waffle under Consumer Protection Code ?

    As per Central Banks form ( in looking after Banks interests) maybe it should be under Bank Protection Code ?
  10. gnf_ireland

    gnf_ireland Frequent Poster

  11. Dauhee

    Dauhee Frequent Poster

    This is of absolutely no benefit to the customer. In fact we will have to pay for printouts and franking of envelopes.
  12. keepon

    keepon Frequent Poster

    'We'll do what we like. Here's some waffle telling you why.'

    I was going to say what an absolutely useless regulator the Central Bank is. However, that would be wholly inaccurate.

    The CB is of critical value to the banks, and our conservative politicians, in putting up a charade that passes for regulation. This is a clear case of regulation washing.

    I would dearly like to see an account of who our central bankers are, where they come from, who appoints them, and what kind of oversight they themselves are subject to. It is patenly obvious that they are not serving the public.
    Dauhee and MrEarl like this.
  13. Sarenco

    Sarenco Frequent Poster

    Eh, it's not exactly a secret...

    This Central Bank launched a public consultation on this initiative back in November 2015 and a number of us called it out as a complete waste of time and money -
    Dauhee and MrEarl like this.
  14. Páid

    Páid Frequent Poster

    AIB's and EBS' are almost identical.
  15. keepon

    keepon Frequent Poster


    A pretty monochrome insider bunch -- neo-classical economists, lawyers, bankers and institutional operators. No lay representation, no outsiders, no one who looks likely to heel the boat, no oversight. Business as usual.
  16. gnf_ireland

    gnf_ireland Frequent Poster

    I am going to go against the grain here. I read the details of these statements from the banks, and while most of the detail is rubbish and will rise to the cost of regulation on the banks, it did disclose a few things of note.
    - BOI state that they may offer different rates for different channels, including online
    - Pepper allows them to charge different rates for interest only as opposed to full repayment options
    - EBS is very clear that you go onto a SVR and not a LTV if coming off a fixed rate
    - Ulster Bank create new rates as offsets to SVR and allow existing customers apply for them. Based on their mortgage amount criteria, they may not be suitable to someone who is planning to aggressively overpay a mortgage

    It also shows that AIB have the least complex model based on LTV and homeloan v BTL only.

    So while they may not be massively useful, they do some some of the hidden intent on how the banks structure their variable mortgages and things to watch out for. EBS and rolling onto SVR rather than LTV is clearly called out and someone has no grounds to complain on this in the future.
    Dauhee likes this.
  17. MrEarl

    MrEarl Frequent Poster


    This is a complete waste of both time and money.... it is nothing more than a charade, because the wording has been left lose enough to permit the Banks do whatever they want.

    The Central Bank fails the public yet again !

    ... but hey, thats all okay because it means the Central Bank can pretend they have acted to help deal with the situation, while the politicans can refer to the great work the Central Bank have done and what an important part they played in pressing the Central Bank to act etc. :mad:
    Dauhee and todo like this.
  18. Showmethemoney

    Showmethemoney Registered User

    They seem to have omitted the bit where they explain why they will not pass on AIB rate cutes to EBS customers.
    Dauhee and MrEarl like this.
  19. Dauhee

    Dauhee Frequent Poster

    The EBS model is to screw existing customers and get them to finance new customers cashback. Not even a decent offering of fixed rates . . . .