Michael McGrath says Minister must rate cut at PTSB

Brendan Burgess

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On 22 December Michael McGrath, the FF spokesman on Finance called for the Minister for Finance to tell the PTSB to reduce their SVR.

[broken link removed]

He was interviewed on Drivetime and I provided a link and transcript here. But it was lost when we lost a few days' posts over Xmas. I can't find it on the Drivetime website. Can anyone else locate it?

Brendan
 
I got this email from Michael McGrath today

 
DÁIL QUESTION
NO 78 To ask the Minister for Finance if he has raised with Permanent TSB the fact that the bank's standard variable interest rate charged on mortgages is significantly in excess of the rate charged by other covered institutions; his views that the rate being charged is contributing to
the bank's mortgage arrears problem; his plans to address the issue; and if he will make a statement on the matter.

- Michael McGrath. * For WRITTEN answer on Wednesday, 18th January, 2012.

Ref No: 2846/12
REPLY
Minister for Finance ( Mr Noonan) : I have not raised this matter with Permanent TSB. The lending institutions in Ireland, including those in which the State has a significant shareholding, are independent commercial entities.

Ultimately the pricing of financial products, including standard variable mortgage interest rates, is a commercial decision for the management team and board of each lending institution, having due regard to their customers and the impact on profitability, particularly where the cost of funding to each lending institution, including deposit pricing, is under pressure.

Neither the Central Bank nor I have responsibility for any variation in the variable mortgage interest rates charged by the two institutions. However the Central Bank has advised me that, within its existing powers, it will continue to engage with specific lenders which appear to have standard variable rates set disproportionate to their cost of funds.

The Deputy will be aware of the report of the Inter-Departmental Group on Mortgage Arrears which was published last October. The report sets out a number of recommendations to address the situation of those in mortgage arrears. The report stated that the issue of mortgage
difficulty can only be addressed in an efficient way on a case by case basis. Arising from the report, a number of developments are underway that will be of assistance to mortgage holders experiencing significant difficulty.
 
So all of a sudden this shower want to give the Regulator more powers,after sitting on their hands for 8yrs and letting the previous regulator and the head bankers drive the bus over the cliff. McGrath trying to rebuild the shattered credibility of a tattered party stinks of vote catching and grandstanding of the highest degree.
 
Eamon O'Cuiv raised it in the Dail this morning.

The Government has been called on to force the mortgage lender Permanent TSB to reduce the interest rate it applies to mortgages.

Fianna Fáil's deputy leader Eamon O'Cuiv says the variable rate of 5.1% being charged by the bank is "despicable".

"People are trapped with this mortgage-holder, because if you're in negative equity, you can't move to another lender…They won't lend you the money," he said.

"I think it's despicable behaviour on the part of the PTSB that they are charging these rates."

He said the rate should be brought in line with the AIB rate of 3% in a bid to help hard-pressed homeowners.

Tánaiste Eamon Gilmore said the Government shared Deputy O'Cuiv's concerns, but that it was a matter for the regulator.

"We are anxious to ensure that there is no discriminatory practice between one customer and another. The financial regulator's job is to deal with the institutions in respect of this," he said.


Read more: http://www.breakingnews.ie/ireland/...-ptsb-interest-rate-536523.html#ixzz1juODoUpB
 
Michael McGrath is some operator. No doubt some people will be taken in by this, but he knows full well that the government has no role to play in regulating private contracts between a business and its customers.

Perhaps he should write a letter to his co-constituent and party leader, Micheal Martin to ask him what the hell he and Fianna Fail were doing when they ran the show. This isn't a new issue. This is not an attempt to actually help people. It's a plain old fashioned attempt to use the troubles of one part of the electorate to boost his own profile, and inflict some damage on the government parties.

It's easy to blame PTSB, but they are a commercial entity behaving like one. We do not want them to become another inefficient extended civil service quango that is run for the publicity of FF and other politicians. PTSB customers cannot move because of negative equity - because of the asset hyper-inflation stoked by FF pro-cyclical economic policies driven to enrich their cronies in Galway Tent. That's the root of this problem. PTSB is just a symptom.
 
Swyper

The government is now the 99% owner of both AIB and PTSB.

They have said that they have no role in setting interest rates, yet they called in the Chairman of AIB and told them to pass on the penultimate rate cut.

There is absolutely no reason why two banks, owned by the same Minister for Finance, should be charging its citizens such divergent rates.

The Minister should ask why.
The Minister should tell PTSB to reduce their rates.

And I am delighted to see anyone - from FF, Sinn Féin , Labour or FG , highlighting this.
 
I agree, I don't care who highlights the problem, as long as it is highlighted, I am a little surprised by Pearse Doherty's silence on the issue, but am only too happy that Michael McGrath and others in his party are highlighting the issue. If it is a fact that they are the highest rates in the eurozone, maybe someone could highlight this on the twitter, facebook pages and to relevant people in power.
 
Brendan Burgess said:
Swyper

The government is now the 99% owner of both AIB and PTSB.

....

There is absolutely no reason why two banks, owned by the same Minister for Finance, should be charging its citizens such divergent rates.
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AIB made a 2.6 billion euro loss in 2010. PTSB lost 270 million in 2009. These institutions are bleeding our money.

The question is, do we want these losses to continue, and effectively the taxpayer having to shore up. The State can't borrow the money as cheaply as AIB are having to lend it to SVR payers. The unfairness here is that AIB should be allowed to set its rates and return to some level of profitability. Until that happens, then the poor ol' PTSB SVR mortgage holder is not only having to put up with more realistic levels of interest (given market conditions), but he also has to pay for the AIB SVR uneconomic rate as well through his taxes.

I'd rather politicians stay the hell away, and let these banks return to profitability as soon as possible so the taxpayer can be done with them.
 

Michael McGrath is only doing what politicians do. He is stirring up an issue that benefits him. If in government, he would be in exactly the same position - does the government borrow money at 5% (presuming the Germans are stupid enough to lend it, otherwise it's 8% +) to under-write continuing losses of banks (closing hospital beds in the process) so they can continue to lend at 3% = rates they never would in the real market conditions. That's what you're asking for, folks.

The problem isn't that PTSB is too high. It's that AIB is too low. But there's no votes in that.

And besides, if you are stuck in negative equity because you bought during an asset bubble, you can blame his party for implementing the last set of populist economic policies - spend like a socialist, tax like a Texan. Are we really so stupid that we think FF is the answer to this?
 
Swyper said:
The problem isn't that PTSB is too high. It's that AIB is too low. But there's no votes in that.
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I'd say you'd be bang on the money there. If AIB is not making enough money, which they couldn't possibly be doing at the rates they are charging it will be the rest of us taxpayers who will continue to subsidise the AIB mortgage holders.

Do we want the banks up and running or not, or should the banks be run by the government and interest rates set by the government. No don't think so. We can't have it every which way.
 

This well written post, in my opinion gets straight to the crux of the matter
 
I have said before that the AIB rates are too low.

When the government pressurised AIB to pass on their rate cut, I publicly said that this was inappropriate and that AIB should be increasing their rates. I was savaged for this. However, by simply raising the issue, I believe I contributed to the government's decision not to put pressure on them to pass on the last rate increase.

So what is the right Standard Variable Rate in today's market? I think we all agree that it is not 3%. But given that the bulk of the funding for PTSB is coming from the ECB at 1%, I think that 5.2% is way too high.

The PTSB SVR borrowers have taken a mature approach to this. They are not looking for the rates to be reduced to 3%. But I think that 4% would be still a sufficient rate to make profits from them.

Charlie Weston has suggested that PTSB will be reducing the rate for new borrowers to 3.6%. If th is is correct, the existing SVR borrowers would be very happy with this rate.
 
Tracker Good! SVR Bad! Banks should be compelled to offer Trackers.


In this thread I argued that the margin charged by banks should be regulated in some way.

I dont think the govt should set the rates however I think a tracker with an upper and lower limit would work. In the past the problem was unsustainable cheap trackers and tracking an ECB rate which did not reflect the cost of money to the Financial Institution.
 
Brendan Burgess said:
So what is the right Standard Variable Rate in today's market? I think we all agree that it is not 3%. But given that the bulk of the funding for PTSB is coming from the ECB at 1%, I think that 5.2% is way too high.
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The sooner we get rid of these banks the sooner we will have a market. That and real insolvency reform that puts some leverage on the side of the borrower (pardon the pun). We will not have a market so long as AIB and PTSB are bleeding money.

I don't know what the right rate is, (though if the market borrowing rate for the state is over 8%, it does suggest that the market rate for borrowers in negative equity should actually be higher than that!) and I do feel personally sorry for the PTSB hard cases. But starting to allow politicians to take this, particularly FF ones, is doing no-one any good.

Michael McGrath is the one raising this because he is a new TD, and all the FF others are pretty tarnished by their complicity in creating this situation in the first place. I don't want PTSB or any other bank to start becoming the plaything of politicians, handing out favours like they do with medical cards and passport applications. The Financial Regulator is there to do a job, and MM should stay out of it.

Would he be writing a single letter to anyone if it wasn't giving him the oxygen of publicity? That is the only reason he is doing this.
 
Swyper



I don't care about the motivation. If O'Cuív or McGrath raises the issue in the Dáil, I am delighted. But if you can get someone else to raise the issue, that's fine with me.
 
Brendan Burgess said:
I don't care about the motivation. If O'Cuív or McGrath raises the issue in the Dáil, I am delighted. But if you can get someone else to raise the issue, that's fine with me.
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Instead of writing pointless letters, I would like to see those same guys actually do something that will make a difference. The solution is not letter writing, and throwing weight behind a campaign that is actually hindering the real solution for everyone, which is to restore a proper banking market to this country. Delaying that, by allowing the banks to become manure to the blossoming political careers of the those like McGrath doesn't help anyone. It just transfers the cost from mortgage holders to wider society - which means more tax and less social services.

This current campaign does nothing for PTSB SVR holders. It does a lot for McGrath and his profile.
 
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Swyper said:
This current campaign does nothing for PTSB SVR holders. It does a lot for McGrath and his profile.
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Have to disagree with you there - this campaign highlights the discrepancy in rates between two state owned banks and the more coverage it gets the better if it means that PTSB will reduce their exhorbitant interest rates to a realistic rate where borrowers may well be able to pay their full mortgage instead of interest only - this would be in the interest of both the lender and the borrower.
 
The FF contribution was also informative.

I had not realised that PTSB had the highest standard variable rate in the euorzone. That is interesting.

It also alerts potential borrowers to avoid PTSB.

And if that furthers the career of someone, so be it.

Brendan
 
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