Mortgage Prisoners - time to get loud!!

I do think it’s too much to ask.

You, and others, have brought emotion into it.

You, and others, are high risk borrowers who entered into loan agreements and did not adhere to them.

There shouldn’t be an automatic entitlement to a fixed rate. Banks and funds are commercial entities that should be allowed to price risk accordingly.

If these borrowers weren’t still impaired in some way, they’d be able to switch to another provider. What they actually seem to want is for everyone else to subsidise them.

Give prime rates to prime borrowers and levy higher rates on borrowers who renege on their loan agreements.

This may be unpleasant for those affected by it, but it’s fair.
 
But that would mean that the contracted terms and conditions changed after drawing down the loan? Maybe a fairer comparison might be between those borrowers that were moved to vulture funds and those borrowers whose loans were retained by their original lender? Or what happens with other types of financing, car loans for example, does the interest rate increase if loans are not repaid as per the original schedule?

I understand Gordon that you feel distressed borrowers should pay a higher rate but I believe the MARP process was put in place to help borrowers and I think the basic fact of the matter is borrowers like me just want an element of certainty in our repayments. I am not looking for a free ride / write-down etc. If I had been allowed stay with my original lender I could have fixed for circa 3%.

I raised my concerns about the variable rate from the outset with Start and was informed it was always 3%.

Anyway it's good to see the different perspectives on this and hopefully will raise some awareness.
 
The contracted terms and conditions become something of a moot point when the borrower ceases to adhere to them in the first instance.
 
Yes Brendan they did review it about a week after I posted. The problem is I can pay a decent amount every month but now I can’t it’s become too much, and there are too many increases one after the other that I would never have predicted, I will update on the reply I get for the SFS review
Thanks
 
Thanks for your input Gordon Ghekko, but a lot of people would disagree with you.

Emotion has nothing to do with it.

If you could not fix your mortgage rate with your Bank in the face of rising ECB rates, would you think it was fair then?

A lot of us want to pay the Mortgage like everyone else, fix in a rate to protect ourselves from monthly rises, and have a bit of certainty and get on with our lives!

This thread is for people only that find themselves in same position and to support each other.
 
Give prime rates to prime borrowers and levy higher rates on borrowers who renege on their loan agreements.

The issue is that there is no regulatory upper limit on what a lender can charge a customer and as we all know these customers can't switch. Maybe you think 7.5% is reasonably but why not 17.5%? That's what these lenders could in principle charge and it would be absolutely ruinous for thousands of people.

I'm as much of a free market guy as you'll get and think that an informed group of consumer is the best protection against an unscrupulous provider. But I even I acknowledge that many people are simply ignorant or vulnerable and need legal protection from providers who would otherwise rip them off

You're a serious poster Gordon and I'm keen to learn if you think what, if any, rate would be too much for this cohort. If there is such a thing as a too-high rate then why shouldn't be set out in statute?
 
Standard variable rates were 17.5% if not higher as recently as 1992. How can a regulatory upper limit apply without wiping out lenders were some 9/11-type event to happen unexpectedly causing the cost of funds to rocket exponentially?
 
How can a regulatory upper limit apply without wiping out lenders were some 9/11-type event to happen unexpectedly causing the cost of funds to rocket exponentially?
You would set it X basis points above some benchmark like the ECB MRO or EURIBOR. Enough to allow lenders to make a profit without gouging customers.

There are already interest rate limits on moneylenders AFAIK. The principle is already established.
 
You would set it X basis points above some benchmark like the ECB MRO or EURIBOR. Enough to allow lenders to make a profit without gouging customers.

There are already interest rate limits on moneylenders AFAIK. The principle is already established.
The danger with doing something like that is that the specified maximum becomes a target. That's an occupational hazard with price controls.
 
The contracted terms and conditions become something of a moot point when the borrower ceases to adhere to them in the first instance.
A contract should contain terms and conditions that apply in the event that the consumer party ceases to adhere to other terms and conditions.
 
The point to remember here is that it wasn’t just ‘non performing’ mortgages that were sold to Pepper, it was also all the ‘performing’ mortgages of the departing banks such as Danske.
There was no provision or sufficient consumer protection in 2014 to transfer our performing mortgages to functioning banks such as happened recently with KBC and Ulster leaving the country.
 
If they’re performing and 100% prime, then why can’t those mortgageholders switch?
 
Pasting my article in this morning's Independent which might provide some useful context into how some have found themselves trapped and why there is market failure requiring intervention.

Government Needs to Act Now to Address the Mortgage Prisoner Timebomb​

By Mark Coan Founder of Online Financial Guide moneysherpa.ie

Around 60,000 mortgage holders are trapped with the so-called ‘vulture funds’.

These ‘mortgage prisoners’ are unable to fix their mortgage rate and can’t switch to a new lender. Over half of them are facing rates of almost 7% in July based on the latest ECB rate forecast. The resulting rocketing repayments are likely to drive increasing numbers into arrears.

Mortgage prisoners have no ability to choose another provider, leaving the vulture funds with an effective monopoly. This is a clear case of market failure.

Many of these customers have never been in arrears, but were caught up in the sale of loan books to non banks after the financial crisis. Others may have slipped into arrears at some point through job loss, divorce or plain bad luck, but have now worked their way back to making their repayments. Currently only around 20,000 of the 60,000 mortgage prisoners are actually still in arrears.

Belatedly, this week the Central Bank has indicated it will investigate the issue. I believe the Central Bank should focus on releasing mortgage prisoners by enabling them to switch away from the vulture funds, which will allow them to access current market rates of around 3% and fix to cap their repayments.

Based on policies adopted in other markets and my own experience talking to affected mortgage holders, I’m proposing three initiatives to help release mortgage prisoners.

Free Advice​

Many vulture fund customers feel isolated and even stigmatised by being with a vulture fund receive little or no financial guidance. Our research indicates that up to 25,000 of the 85,000 with vulture funds can actually switch to other retail lenders or avail of equity release, but don’t as they often aren’t aware of their options and assume they are trapped. Others aren’t aware of the steps they need to take to open up the option to switch down the line, so haven’t taken those steps even though they could.

The government needs to fund independent one on one financial advice sessions for vulture fund customers to help them make the best financial decision possible. The financial circumstances of vulture fund customers are often complicated, simply sending a letter to these customers listing a few options simply doesn’t cut it.

Removal of Current Affordability Barriers​

The retail lenders won’t take on many of these customers due to them failing their affordability tests, these tests calculate the mortgage applicants ability to afford the repayments based on income and outgoings. This is despite around 20,000 of the 60,000 mortgage prisoners successfully making repayments at rates much higher than they would if they switched, which is strong evidence of their actual ability to repay.

The Central Bank should work with high street lenders to introduce ‘modified affordability tests’ for mortgage prisoners, in the UK the Financial Conduct Authority did this back in 2019, to allow more of these customers to pass lender affordability tests and switch to lower rates.

Support to Close the Affordability Gap​

Finally, the government should extend the current First Home Scheme for First Time Buyers to mortgage prisoners, to allow them to reduce their outstanding mortgage size in return for giving up equity in their property. A smaller outstanding mortgage equals lower repayments and higher affordability. Higher affordability means more being able to switch away from the vulture funds to lower fixed rates.

This extension would follow a similar model to the one recently used to extend the scheme to evicted tenants post the lifting of the eviction ban.

Solutions not Slogans​

Political grandstanding about ‘evil vulture funds’ is misleading, distracting and upsetting to those who find themselves with these funds. These funds are simply focussed on making a return for their investors, who are mostly pension funds, nothing more.

Instead mortgage prisoners deserve practical realistic solutions to the very real challenges they face. The market is failing these households and meaningful government and regulatory intervention is required.

Government and the Central Bank have failed to address the timebomb that has been ticking since the sell off of mortgage holders started in 2008 and recent ECB rate rises mean time is running out fast. They now need to act, swiftly and decisively to implement measures to release the mortgage prisoners, before thousands more are forced into arrears.

The full moneysherpa Mortgage Prisoner report and corresponding data sources are available here https://moneysherpa.ie/vulture-funds-ireland/. If you would like to join the mortgage prisoner campaign, need advice or have ideas you can mail us here mortgageprisoner@moneysherpa.ie.
 
Hi Marc

I commend you on highlighting this issue. However, I don't agree with your solutions

Free advice to those who can switch

Why should the taxpayer pay you to advise someone who can switch? We don't pay for people to advise ordinary mortgage holders or insurance customers or mobile phone users.

If people can switch, and don't, then that really is their issue.

I fully support paying for MABS to advise people in financial difficulty.

Brendan
 
The Central Bank should work with high street lenders to introduce ‘modified affordability tests’ for mortgage prisoners,

Again, I can't agree.

The Central Bank should restrain reckless lending. But they should not be encouraging it.

It should be up to the banks to decide if they want to take over the mortgage of a vulture fund customer.

The Central Bank could ask the lenders to review their credit criteria to make sure that they are up to date but that is all.

Brendan