Just to clarify, McGrath is not a new TD, he was first elected in 2007 and as such is as tarnished as the rest of them.
Agree with the rest of Swyper's points.
Michael McGrath says Minister must rate cut at PTSB
- Thread starter Brendan Burgess
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Just to clarify, McGrath is not a new TD, he was first elected in 2007 and as such is as tarnished as the rest of them.
Agree with the rest of Swyper's points.
All that shows is that we don't have a European single market in the mortgage market. Which is a problem. It would be great if any PTSB mortgage holder could shop around Europe and not be frozen into a current arrangement because of this dysfunctional Irish market. One other thing to note is that SVR is quite rare in the Eurozone, so making a comparison is difficult when most Europeans rent or have 20+ years fixed rate mortgages.
The question is - at what rate do think private, non-government owned banks would lend to PTSB SVR holders - particularly those in negative equity?
Do you think the market would hold a rate of 5.2%? There's no chance of that. With negative equity, you would be paying up to double that, as part of the loan is effectively unsecured.
What you are effectively asking the taxpayer to do is to fund the cost of private mortgages.
Not only do I not like the naked opportunism of McGrath, but the policy he wants - to subsidise private mortgages is just wrong, and long term helps no-one. I can see how PTSB mortgage holders can feel hard done by, but we do not need kneejerk, counter-productive policies that benefit a few at the cost of the many.
Brendan Burgess
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That is one of the questions.
The answer is that borrowers in negative equity would not get loans from any bank. If they could transfer, they would.
But most(?) of PTSB's funding comes from the ECB at 1%. The highest PTSB is paying for short notice accounts is 3% on amounts in excess of €10,000. It is paying 4.47% for money fixed for 2 years and 2 months, but that is a tiny proportion of its overall funding. I don't know the blended cost of funding, but I would guess it's less than 2%.
The PTSB SVR borrowers are subsidising the cheap trackers and it looks as if they might be asked to subsidise the new business as well.
It makes no sense.
seantheman
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I know that this is attributed to O'Cuiv in an earlier post,but do we have a link to the source?
If that were the whole story, then PTSB would not be losing money. The real cost of funding has to include provision for bad debts and operational costs.
The losses are effectively being funded by sovereign borrowing. If we add another set of handcuffs to the the banks, how are we going to stop this bleeding of the public purse? How do we get them back to some sort of profitability so they can be sold back to private shareholders and recoup some of the enormous debts the state has taken on to keep them from going under?
How many letters will McGrath be writing bellyaching about tax rises and cuts in social services?
GettingThere
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You seem to imply that people are looking for a handout here when the crux of teh discussion is abouting seekn parity or fairness. Fact is that PTSB is a state owned body as is AIB. AIB SVR is probaby too low and the minister should never have strong armed them to pass on the penultimate reduction. However fact remains that the state is charging selected handcuffed borrowers en excessive amount for loans from the same source of funds.
Up to recently PTSB were charging LTV borrowers 6.19% as opposed to 3.25 from AIB. What needs to happen is a harmonisation of rates across state owned institutions. If that means increasing AIB SVR and decreasing PTSB SVR then thats how it should go.
The fact that PTSB will probably be merged soon lends more credence to that.
And its announcemnt that it is charging new borrowers 3.7% further indicates that it knows its SVR is daft relative to others in the market.
Minister Noonan doesnt seem to understand that he has already stepped in to the rate setting mechanism of the banks with his strong arming of AIB. This was ill percieved and is being highlighted by McGrath and others.
I'm not a party member or advocate, but he and some others have at least understood the problem of disparity that is evident at this stage.
The inference that PTSB borrowers should suck it up else the tax payer will be funding any correction is wrong.
PTSB has been mismanaged and they have decided to increase SVR over the years unilaterally in order to have some leverage on business loans and to subsidise the trackers. They did the sums wrong and the dogs in the street can see that.
If they correct their model while understainding that outlandish SVRs will promote more default, they can integrate with AIB or whomever and harmonise or standardise rates to ensure a greater fulfillment of the loan book.
So I say fair play to McGrath for bringing this to the table regardless of what party he is in. Brian Hayes has contributed to the discussion as well stating that the rate increases from PTSB were flagged but people were asleep at the wheel.
Seems time for Noonan to wake up and smell the coffee. I've personally mailed over 20 TDs and representatives (over tracker issues and on the general PTSB inordinate SVR). Have had encouraging responses from McGrath and a few others (independents mainly). Little or no response from FG other than the ministers stock response on having no role to play in rate setting.
Up to recently PTSB were charging LTV borrowers 6.19% as opposed to 3.25 from AIB. What needs to happen is a harmonisation of rates across state owned institutions. If that means increasing AIB SVR and decreasing PTSB SVR then thats how it should go.
The fact that PTSB will probably be merged soon lends more credence to that.
And its announcemnt that it is charging new borrowers 3.7% further indicates that it knows its SVR is daft relative to others in the market.
Minister Noonan doesnt seem to understand that he has already stepped in to the rate setting mechanism of the banks with his strong arming of AIB. This was ill percieved and is being highlighted by McGrath and others.
I'm not a party member or advocate, but he and some others have at least understood the problem of disparity that is evident at this stage.
The inference that PTSB borrowers should suck it up else the tax payer will be funding any correction is wrong.
PTSB has been mismanaged and they have decided to increase SVR over the years unilaterally in order to have some leverage on business loans and to subsidise the trackers. They did the sums wrong and the dogs in the street can see that.
If they correct their model while understainding that outlandish SVRs will promote more default, they can integrate with AIB or whomever and harmonise or standardise rates to ensure a greater fulfillment of the loan book.
So I say fair play to McGrath for bringing this to the table regardless of what party he is in. Brian Hayes has contributed to the discussion as well stating that the rate increases from PTSB were flagged but people were asleep at the wheel.
Seems time for Noonan to wake up and smell the coffee. I've personally mailed over 20 TDs and representatives (over tracker issues and on the general PTSB inordinate SVR). Have had encouraging responses from McGrath and a few others (independents mainly). Little or no response from FG other than the ministers stock response on having no role to play in rate setting.
So the government should set the interest rates the PTSB and AIB charge? How will they decide what rate should be charged?
The Central Bank report released today on mortgages indicates that currently the cost of the Eligible Liabilities Guarantee (ELG) fee to government adds 1% to the cost of funding plus the cost of funding @ 2.2% taking the total cost of funding to 3.2%. The report equates this then to an average SVR mortgage rate of 3.9%. Margin above ECB of 2.9% to 3.2% presumably.
Before the ELG, the net interest margin rate average was 1.6% between 2005 and 2008 when the ECB rates were higher and there was more competition in the market. There were also less arrears and more employment in that period as well.
Before the ELG, the net interest margin rate average was 1.6% between 2005 and 2008 when the ECB rates were higher and there was more competition in the market. There were also less arrears and more employment in that period as well.
As individuals, I hope each of the PTSB SVR mortgages find a way out of it. The fact is that I think it is universally agreed that government-run banks is something that is un-desirable. The state cannot continue to fund losses on these banks. Or it can, but then it needs more tax or more spending cuts in other areas.
If MM or any other golem of FF can start influencing the regulator or the banks themselves, then it is not long before the queue for special interest will grow. The unions will start demanding no pay cuts or job losses. Pensioners will be demanding higher savings rates. Borrowers will be demanding write-offs and rate reductions. The left-wing will be looking for preferential rates for "workers", and levies for the "rich". All on the basis that "sure, isn't it state owned"? Where does it end? The one party to this who had no say in the private contracts signed between PTSB and its customers, is the taxpayer. We cannot continue to socialize private debt, regardless of the awful precedents that should be set.
In life, we win some, we lose some. If the state should be stepping in every time luck is not on our side, then there will be a very long queue of unlucky people outside Golem's constituency office.
If MM or any other golem of FF can start influencing the regulator or the banks themselves, then it is not long before the queue for special interest will grow. The unions will start demanding no pay cuts or job losses. Pensioners will be demanding higher savings rates. Borrowers will be demanding write-offs and rate reductions. The left-wing will be looking for preferential rates for "workers", and levies for the "rich". All on the basis that "sure, isn't it state owned"? Where does it end? The one party to this who had no say in the private contracts signed between PTSB and its customers, is the taxpayer. We cannot continue to socialize private debt, regardless of the awful precedents that should be set.
In life, we win some, we lose some. If the state should be stepping in every time luck is not on our side, then there will be a very long queue of unlucky people outside Golem's constituency office.