Mortgage rate 'war'

Discussion in 'The Fair Mortgage Rates Campaign' started by dave2015, 12 Dec 2017.

  1. MrEarl

    MrEarl Frequent Poster

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    Hi,

    Just wondering, do any of you good people ever make contact with journalists after an article has been published, to provide relevant information or advise on inaccuracies ?

    I've sent the odd email, but generally found that most of the journalists have little or no interest in acknowledging where they got something wrong. Disappointing, to say the least.
     
  2. Gordon Gekko

    Gordon Gekko Frequent Poster

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    Hi Mr Earl,

    I have, and to be fair the journalist(s) in question have issued clarification(s).

    Regards,

    G
     
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  3. RedOnion

    RedOnion Frequent Poster

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    Similar experience to yourself @MrEarl , but it's been a while since I've written to a journalist. It's rare that there's something big enough to bother, and I'd be revealing my real name - working in banking it's difficult to be seen as unbiased.
     
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  4. lledlledlled

    lledlledlled Frequent Poster

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    It is also inaccurate to say UB are the only lender to allow overpayments on fixed mortgages. KBC also allow this up to 10% per year.
     
  5. gnf_ireland

    gnf_ireland Frequent Poster

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  6. peemac

    peemac Frequent Poster

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    And when PTSB try and do something about it, as in selling all the non performing loans of defaulters who will not engage with them, Fianna Fail, who can take some blame for the banking crisis, call foul and it becomes a political football.

    The primary reason we have high SVR in this country is that it is almost impossible to repossess a house due to a defaulted loan without spending vast amounts on legal fees. That means European mortgage banks will not enter this market.

    And guess who pays for those vast legal fees and for the losses caused by the defaulters? - Yep the Variable rate mortgage customer like yourself.

    Why won't the media report this - its a far far bigger story. Well in excess of one million mortagges are variable rate mortgages, I would estimate several hundred thousand are paying in the region of 4%.

    A person with €300,000 mortagge over 30 years is paying almost €250 a month / €3,000 a year to fund these strategic defaulters. (based on 4.25% v 3% rate)
     
  7. gnf_ireland

    gnf_ireland Frequent Poster

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    I am not sure they are all strategic defaulters but understand what you are saying

    It is definitely a reason - whether it is the only reason is another matter.

    It is probably a major reason that we do not have any competition into the market in the last while. The banks need to be able to enforce the security on the loan in a meaningful timeline and cost.

    And yes, this is shocking. Banks should be allowed to sell non-performing loans for defaulters who will not engage with them. If they are engaged in a process, this is one thing but non engagers are a completely different case. It would reduce the level of strategic defaulters in my personal view


    Its an unpopular statement to make but someone who cannot afford their house, and who has no chance of being able to afford it in a reasonable term needs to have the house repossessed. Yes, the social welfare net needs to be able to capture and support this person, but having the banks (private enterprises) carry this social burden is rubbish. And don't talk about us rescuing the banks - its a non story at this stage. The government needs to stop outsourcing its social responsibility to charities and banks and take control of it themselves. Until this happens, non-tracker mortgage holders (both variable and fixed) continue to pay for this social responsibility
     
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  8. Paul Reilly

    Paul Reilly Frequent Poster

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    At least everyone can now see that bank PTSB for what they are.
     
  9. Andy836

    Andy836 Frequent Poster

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    Why should it be limited to non engaging defaulters?

    Why shouldn't they be allowed sell any mortgage they want?
     
  10. gnf_ireland

    gnf_ireland Frequent Poster

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    I think those that engage are at least trying to come up with a solution with the bank and there should be some sort of time frame where a solution should try to be worked out.
    Its not like our banks have shone themselves in glory in the past while either, and are not prone to making 'errors' either. Imagine if the tracker scandal had resulted in thousands of repossessions instead of the double digit numbers? The human cost of that would be massive and I don't think 10% compensation would cut it.

    I have no problem with accountability, as long as the accountability is clearly called out on both sides and the banks are also held properly to account when they break the rules as well...

    And I am not a socialist either, but things are rarely black and white in this country.

    Personally, I would love a scenario where you require 20% deposit (no exceptions), 20-25 year mortgages maximum, any arrears over 180 days repossessed and 1.7% interest rates to go with it. But our national obsession with property will never let that happen !
    For the record I am paying 2.95% on a 6% LTV mortgage in South County Dublin. That is about as risk free as they come
     
  11. MrEarl

    MrEarl Frequent Poster

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    What does that mean ?






    .
     
  12. Andy836

    Andy836 Frequent Poster

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    Time frame? They've had 7 or 8 years.

    As for accountability - the bank shareholders were entirely wiped out. They lost 100% of their investment. Boards and senior management were all removed. That is accountability.
    There has been no accountability for defaulted mortgage borrowers.
     
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  13. gnf_ireland

    gnf_ireland Frequent Poster

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    @Andy836 Firstly, I am not disagreeing with you in principle. As I said above, I would gladly see Ireland move to a more European model in its property dealings, but at the moment it would be like closing the barn door after the horse has bolted.

    Property is a politically toxic topic to most. Its like the 'evictions during the land war of the 1870's' is fresh in peoples heads. Groups such as the 'New Land League' prey on the fear that people have that their homes would be taken off them. You have parties like FF being ultra populist in this area, forgetting they were a major contributor to the cause of this issue

    Yes, but has been said on another thread on here about the pension levy - these were unprecedented economic times with high levels of unemployment and emigration. Most who held their jobs took decent pay cuts, and many are only getting back towards parity now a decade later. Many people have experienced a lost decade of earning power. In short it was exceptional times.

    For PTSB, I accept they have a large amount of impaired loans due to their lending behaviour during the boom times. However, if they had any sense at all in this, they would sell off the most impaired first - those that are over 2 years in arrears and have not engaged with the bank to agree a revised payment structure & those who agreed revised payment structures and failed to honour them. These could have been sold off relatively easily and there would be minimal media coverage about it since its very hard for anyone to stand up and argue against their sale.

    Once this was done, the bank could look at the next tranche and see how to handle it. The only thing I would say about the sale - and agree they should be allowed to sell any loan they wish - is that if a settlement has been agreed between the borrower and PTSB, the purchaser should be legally bound to honour that settlement. So if the mortgage is split and a third parked interest free, the same arrangement should be honoured. I also think they should be under the control and regulation of the CB and answerable to the FSO, the same as any other financial institution.


    I appreciate this is not the same BUT:
    Lets say KBC decided to sell my fully performing mortgage to a 3rd party - and why should they not be allowed to do that - I am on a 10 year fixed rate and default back to the KBC new business rate in 10 years time. But lets say this 3rd party does not actively sell mortgages - what rate should I default onto then - the KBC rate that has nothing to do with them or some random rate they choose? This is where there are complications with selling mortgages and potential reductions in interest rates that would not be passed on. I also think if a performing mortgage was to be sold at a haircut to a 3rd party, the mortgage holder should be offered a similar deal as well.


    Agree re shareholders. Disagree re all senior management and most went on their way with serious pension top-ups that can hardly be defined as accountability.
    The banks themselves were bailed out by the taxpayer, and this included provisions for impaired residential loans. I am not sure that many borrowers who have engaged with the bank have been offered much debt forgiveness where affordability is an issue.
    I am not proposing mass debt write-off, but where a loan is impaired, the property is in negative equity a decade later, affordability is an issue, surely it makes sense to write the debt down to the current market value (assuming the borrower could afford this mortgage repayment), and the bank take a permanent charge of say 10-25% on the property (depending on the level of write-off) so it cannot be sold or transferred without the bank getting a payment. The bank is not going to get any more than this if it repossesses the property or if it sells the mortgage to a vulture fund.

    Because its less politically toxic initially and non-engaging defaulters are most likely to have longer arrears, be strategic in their defaulting, more difficult to get out of the properties and less likely to be able to recover any money from without repossession.
     
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  14. gnf_ireland

    gnf_ireland Frequent Poster

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    Last edited: 22 Feb 2018
    *edit* retracted as I should not have replied to a specific question asked on someone else. I had no 'right' to speak on their behalf ! Apologies
    *end edit*


    However, many people fails to realise that the reason PTSB has some of the highest SVR mortgage rates is because of the levels of non-performing loans, currently standing at around 28% (I heard quoted today). That basically means that for every 10 mortgage holders with the bank, 3 are not paying back as per the mortgage agreements. This means an increased burden is then pushed onto the other 7 who do pay in the form of higher interest rates. Getting rid of a block of non-performing loans removes levels of this from the bank and may have more positive benefits for the existing customers

    The reality is this is not about people seeing what PTSB are really like - its about seeing what a high percentage of mortgage holders within PTSB are like and effectively getting you to pay their mortgage for them. Maybe your frustration and anger should be redirected to the long term non-engaging borrowers and strategic defaulters rather than the bank itself.

    Asked a different way, how do you feel about paying an extra 0.5% in mortgage interest (made up figure) to cover the high levels of arrears within PTSB ?
     
    Last edited: 22 Feb 2018
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  15. Andy836

    Andy836 Frequent Poster

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    There's a lot there I agree with.
    - The use of some internal benchmark for SVR rate setting needs to end. It is not transparent and it just a stupid thing to continue with. Even if they want to benchmark it against an internal Cost of Funds then they should be required to publish the formula, the calculation method and the inputs. This should be done at a regulatory level.
    - I agree, they should sell off the total drudge first before selling off the less drudgy stuff. However, I am cognisent that there is an element of needing to include a mix of loans in any portfolio sale to provide some level of cashflow to the purchaser while they work it out.
    - Re capital being injected including an element to cover provisions on consumer resi loans - that's probably true however this would've included some assumption on realizing collateral from NPLs.
    - Your point on the write down to market value is valid and I've no problem with that but
    (i) the subsequent written down loan needs to be priced & structured appropriately. It's no good writing down the loan and putting a 2% interest rate on it to make it "sustainable". A 100% LTV €100k loan paying 2% does not have a €100k value on the bank's balance sheet if the appropriate rate would be 4% - in fact the book value is closer to €65k-€70k.
    (ii) the hard cases are those where the collateral value is higher than the Borrower can afford and I'm sure there are tons of them out there. Yet this is not addressed by any commentators or politicians. Take for example - €400k loan, €300k collateral value but the Borrower can only afford €200k mortgage. There is no justifiable argument for the Borrower to keep the house and for the Bank not to enforce the collateral. I think this is something which is really being missed in all of the hysterical claims from those opposing these sales. Writing it down to €200k (the amount they can afford) even with a 25% residual interest in the property, is still a gift of €25k to the debtor. That is not acceptable and would be paid for by other Borrowers and the shareholders.
    - PTSB was overly aggressive in their lending practices during the boom (they all were, €20bn + in annual mortgage volumes is insane). But so were borrowers. If the loss is to be shared then so should the profit. Otherwise mortgage rates need to increase significantly. Property prices have risen ~40% since the trough. Should PTSB be getting a share of the upside on mortgages they issued to Borrower's in 2011 & 2012 & 2013? What about those who took mortgages from PTSB in 2000 - should they share give some upside to PTSB? The downside sharing argument is clocked in claims for "fairness" etc but to be truly equitable, they'd have to give them some of the upside too.
    - The political toxicity of it is the real problem. There are too many politicians given airtime and not pressed on issues. I watched John Moran on Cooper & Yates last night - he was afforded no time to address the rubbish the politicians were speaking. The media is as much to blame for this as anyone - but then again, no one wants to pay for the media so we get what we pay for.
     
  16. MrEarl

    MrEarl Frequent Poster

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    Hi gnf_ireland,

    Thanks for the detailed reply, but I was hoping that Paul might actually clarify his own words for me (just incase any of us might have misunderstood his intentions).




    As for the title of this thread ....

    surely it's time one of the Mods changed it from Mortgage Rate "War" to Mortgage Rate "Spat", so the title of the thread more accurately reflects what's happening in the market. ;)







    .
     
  17. gnf_ireland

    gnf_ireland Frequent Poster

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    @MrEarl I fully understand this and I am sure Paul will come and clarify his words in due course.
    I have had a number of discussions with Paul on this in the past, including a recent one on the reduction of TRS.

    No argument here
     
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  18. gnf_ireland

    gnf_ireland Frequent Poster

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    Absolutely agree with this point. This would have a number of benefits including the ability for customers to be able to assess the best variable rate not only today but into the future. This would be particularly true is the cost of funds measure was the average across all banks in the state, and published once a quarter by the regulator.
    The other advantage here is it would be up to the individual bank to make improvements internally. Any efficiencies they can make against the other banks would mean higher profits for them. They are in control of their own destiny so to speak - or at least the sector is. I would expect it would not result in a race to the bottom.
    The other option with variable rates is to enforce a margin - say +/- 1.5% on the rate signed up to for the duration of the loan. I see some countries, including Belgium, have something similar. This would at least provide a cap on interest rates.
    But personally, I would prefer to see lifetime fixed rates on mortgage loans, but the ability to refinance at a reasonable break cost. I think it was Denmark that had something like this

    Understand, but maybe then target some buy to let mortgages or some of the residential mortgages which have not been restructured etc. By doing it the way they have, they created more political ammunition that engaging with the bank is meaningless as the bank can break the deal by selling off your mortgage at any time. Surely everything should be encouraging people to engage with the bank so we can draw a line until this boom time mess as quickly as possible - it has been a decade after all
    I also feel there needs to be special treatment for strategic defaulters, once identified. Most who do not engage fall into that category to my mind, except the ones who are so petrified of the banks they cannot cope !

    Agreed - if a customer gets a writedown they need to be able to afford the new mortgage at current mortgage rates. The revised mortgage needs to be sustainable and provide the bank with an equal footing to if it was repossessed and sold at market value. Anything less than this the bank loses out financially, meaning someone else has to pay

    So this is where there is 100k equity in the house and the mortgage is simply not affordable by the customer.
    In my proposal, I would extend the write-down approach to a maximum of say 10-15% in positive equity scenarios with the charge on the property of say 15-20% (so a premium for the writedown). If a writedown of 15% will not bring the mortgage to affordability and the house is in positive equity, then the customer needs to downsize to something they can afford.
    If I buy in Dalkey for 750k, and my mortgage is 400k, but I can only afford a 200k mortgage due to changing circumstances, why should I be allowed to keep the house in Dalkey. The person needs to downsize to a house they can afford in a place they can afford it.
    For the downsize model to work, the bank have to have an obligation to offer the person a mortgage for what they can afford - in both our cases 200k, on the assumption it is in positive equity. In your example that will allow the customer a maximum of 300k purchase fund and in mine 550k.

    I assume you are talking about arrears cases in these windows rather than general mortgages. I would not expect a performing mortgage to be given a writedown, and similarly I would not be expecting a performing mortgage to have any claim on the upside.
    In arrears cases, there are two types of arrears in my view - one is short term cash-flow issues and the second is affordability. Affordability I think we have discussed with the negative equity (repossession or capped writedown with charge) and the positive equity (downsizing). The short term cash-flow scenario is like a taxi driver who breaks his leg and cannot work for 8 weeks. We will get back on his feet (literally), but there is a short term cash flow issue. I would expect this person to engage with the bank and agree some sort of payment holiday etc
    I know what you mean around fairness and equitable, but I guess the issue in the capped write-down in negative equity scenario is even if the bank repossesses the house they will not get anything more from it. The 5% premium in the case of positive equity writedowns is to ensure it is not overly abused. The fact the bank now hold a percentage of the asset means they will benefit from any future upside in value

    Absolutely agree. I fail to see how some politician cannot come out and say that someone who has not paid their mortgage for 2-5 years cannot be repossessed. We need a rational discussion on repossessions before we can have a rational discussion on interest rates.
    And it appears the majority of people do not realise that they are paying for the customers who do not pay their mortgages to stay in their homes. There needs to be a campaign similar to the insurance one - the cost of insurance (mortgages) + the cost of fraud (defaulters)
    I was very surprised how little media coverage the commentary around strategic defaulters has received
     
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  19. renter45

    renter45 Frequent Poster

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    Thought this thread was to highlight any rate cuts in the market, not a personal agony aunt for one person with a high svr
     
  20. gnf_ireland

    gnf_ireland Frequent Poster

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    I am probably guilty of not sticking to the topic on the thread so apologies. Mod's feel free to delete or move the comments on PTSB loan sale to another thread.
     
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