Report on public meeting 7 May

[Raging Bull]

What do you expect us to do? In an ideal world the Irish Competition Authority fulfills its mandate. Its on record as saying it won't. ..are we all supposed to be good Europeans and continue to subsidize those on trackers, keep propping up the profitability of the bailed out banks and take one for their bond/shareholders.

There's nothing wrong or childish in taking on a cartel.

 

[martin57]

I couldn't support any of the suggestions made.

Central Bank:

Other than dictating the market clearing funding rate, the Central Bank should not be getting involved in rate setting.
Putting a cap on a Bank’s customer rates effectively interferes with the pricing of risk.
If a Bank can’t price its own risk then one could argue they could have recourse to the Central Bank - shadow directorship, overstepping its mandate etc.
Irish credit rates are high and so are Irish RISK levels.

- Mortgage Default rates are up at 10%,

- There is limited ability to enforce security,

- There is public & social opposition to enforcements,

- As a result, enforcement costs are very high - mandated delays between the event of default and potential settlement, multiple court hearings, non-payment in the intervening period.

- LTI coverage is poor, increased tax, lower incomes etc – evidenced by the spokesperson, Sarah, who admitted she couldn’t switch as she couldn’t meet the new LTI threshold.


Is it even possible to give the Irish Central Bank the power to set maximum interest rates? Is the Irish Central Bank not an agent of the ECB?
I find it interesting to hear Noonan during the week saying (i) he’d await the report from the Central Bank, then (ii) he’d call in the Banks and tell them to reduce their rates. He has completely prejudged the report. Any other sector of society and people would’ve picked up on this.

Brian Hayes:

The Brian Hayes comments represent “me fein” politics at its finest.
How many in attendance will now think about voting for Mr Hayes or Mr McGrath?
Provide people on variables with Tax Subsidies? This is potential tax income being directed at one group in society that could go elsewhere – social housing (Christ!), lower PAYE rates for everyone, increased health spending. No debate? What about the impact this would have on the valuations of AIB & PTSB? The proceeds from which are to be used to repay state debt.
As for “Irish banks continue to gouge holders of variable rate mortgages……………..The banks continue to charge almost 2% more for their product compared to similar mortgage products in the Eurozone”
That’s the thing. These are not similar products. In the rest of the Eurozone, you can enforce your security.
As for the FHA providing “25 year fixed term interest mortgages”? That statement doesn’t even make sense. Is the tenor fixed? Because that’s what “fixed term” means. Smacks of someone talking about something someone isn’t familiar with. What break fees would be incurred on these fixed rate loans? Or are borrowers locked in their “1st time buyer” properties for life?
“The Central Bank should also be supporting plans by the Credit Union movement to provide a limited range of well secured mortgage products”
No problem with Credit Unions doing mortgages but the second part of his statement is More Nonsense – as outlined, Irish home loans are not well secured. The Banks are struggling to enforce their security.


Ross Maguire:

Challenge the legitimacy of variable interest rates? What sort of statement is that (maybe Brendan paraphrased him – BB was rushing).
Libor/Euribor are bloody variable rate used by the entire world - How can it be illegitimate?
Is he questioning the use of internal Bank rates i.e. rates no linked to some publicly quoted rate?
The fact there was widespread support for this is hardly surprising considering the audience (a room full of SVR borrowers).


My thoughts:

- The housing market is completely dysfunctional.
- Supply is virtually non-existent.
- Average build costs are way too high - build up FFS like any normal city. I’ve lived in a 14 story building and a 38 story building – both very nice looking and both fine. Why can’t this work in Dublin? The sky line is not that great guys.
- If you want, take the new “Bank levy” and build proper commuter transportation infrastructure – dual line tracks with express trains.
- Fix the repos. Allow a bank enforce its mortgages quickly. Housing people afterwards is the state’s problem – not those of the Banks.
- By making a Bank provide free accommodation to delinquent borrowers the costs are ringfenced directly onto that Bank's customer base rather than the entire taxpayer base.
- Introduce proper rental market controls. Landlords cannot evict delinquent tenants. The PRTB is a waste of time. If you want, set proper rental increase caps linked to cost inflation, interest rate inflation and tax inflation.

I agree with much of Andy's post above and certainly wouldn't support any of the reported proposals.

I have to say that I find it very frustrating that the SVR campaign puts so little emphasis on demanding that our government deals with the underlying reasons for the high mortgage rates. I don't mean to insult anybody but it seems very childish to me to simply demand reductions to SVR rates and I suspect this contributed to the disappointing turnout at the meeting.

And as for the carpetbagging politicians...

when you think that the water protests started off with a hand full of people in cork and look
at that campaign now every campaign has to start somewhere so well done to Brendan and everyone that turned up. the meeting was held during the week and wasn't excisable to everyone if the next meeting was held on a Saturday and if we could get some kind of on line petition going there would be a better turn out. we all know the banks have to make a profit but they don't have to crucify the people on these high SVR who helped bailed them out. we are living in different times now most people didn't know that when they took out their mortgages they would be paying these extra taxes ( usc , lpt, house hold charge , water tax, pension levy) when it comes to taking money from us the government can move mountains when it comes to changing things to help people it a brick wall. I could pay these high SVR rates on my mortgage if I wasn't paying all these extra taxes. when I filled out my FSF form with my bank the girl asked me if my finances had changed. I laughed.

 

[peno]

Its on record as saying it won't. ..are we all supposed to be good Europeans and continue to subsidize those on trackers.

I think that is a fundamental issue.
SVR customers are not subsidising trackers but rather they are subsidising people failing to pay the mortgage.

While I do agree that the current variable rates are too high - like a previous poster said failing to acknowledge the cause of this means the argument loses credibility.

Some of the suggestions before and during the meeting are simply ridiculous (tax relief above a certain amount - cbi setting rates ) and gives people and easy argument against the movement

The government is in a dilemma they can only help svr holders by reducing the costs of the banks and that means making repossions easier - although vitally important is that any negative balance should be written off

However again the credit rating needs to be affected otherwise what us the point of a rating??

 

[Andy836]

Again, spot on analysis by Andy>


But your 'thought' re:

..should carry the proviso that all these mortgages should -

A) become non-recourse
B) with no short fall chased upon voluntary sale and
c) credit rating not affected.

If the above (or a variation thereof) is not included in a 'fix the repos' solution..
.. then I and thousands of others will happily reside where we are until the banks 'engage' with us, under our 'terms'.

Folk might not like it (and the above proviso may sound like 'a pipe dream'); but in any discussion, in any arrangement (negotiated or forced) -

..our families come first,
not our neighbours,
not the state and
NEVER the banks.

I'm not sure you can make the balances non-recourse as a matter of course. If you were to do so you'd limit your argument for reducing the variable rate as the risk has increased and arguably the rates should increase.

There is no point going after money that's not there and I expect between legislation and social pressure, the Bank's will be forced to adopt policies along similar lines.

Not affecting credit rating can't happen. Someone has failed to repay a creditor - this needs to be tracked as it can be an important indicator for future creditors. However, I believe these bad credit marks should be expunged after a set period of time (perhaps to coincide with the tenor of bankruptcy or something).

To your point about family - As I said, it is "me fein" politics. Whether people want to admit it or not, people are not very civic minded. We are all out for ourselves. If we were not, all the others who are out for themselves will eat our (and our family's) cake! And I like cake!

The left are looking for increased tax distributions from the wealthy (not their voters) as it benefits the "working class" (their voters). The "right" (we don't really have a right in Ireland) want to limit tax & state as it benefits the "poor" (which is a relative term) and not their voters. It's all clientelism [sp].

I agree with much of Andy's post above and certainly wouldn't support any of the reported proposals.

I have to say that I find it very frustrating that the SVR campaign puts so little emphasis on demanding that our government deals with the underlying reasons for the high mortgage rates. I don't mean to insult anybody but it seems very childish to me to simply demand reductions to SVR rates and I suspect this contributed to the disappointing turnout at the meeting.

And as for the carpetbagging politicians...

Is there any need for them to justify their demands? No one else does.

- D Hall wants (i) everyone's debt to be written off while they keep their house, (ii) for defaulters to jump the huge social housing lists, or (iii) for the state to pay towards building equity in defaulters homes. There is no consideration given to who eventually pays for this.
- The Anti-Water/Property/Everything tax people don't want to pay for XYZ and don't care where the money comes from. Again, there is no requirement for them to explain how these lost revenues would be replaced.
- The Medical Card lobby think it abhorrent to take a medical card off of anyone. There is no questioning whether it is right that 40% of the population has one.
- The public/semi state sector unions want pay increases. It's not their problem the government is still funding a large deficit or their high wages have us paying the highest (near highest) utility bills in europe.
- Retailers give staff short term/low hour contracts. It's not their problem if its not enough to run a family on.

Why should SVR holders invest time & effort into finding the cause of their high rates. It would involve analyzing financial accounts, central bank data, court processes etc etc. It's not worth the effort when (i) all you have to do is call RTE and have a rant, throwing in "bondholders" "Germans" "elites", and (ii) no other campaigners bother, (iii) their target is the Banks which as we all know are always wrong/untrustworthy/full of people on bonuses/tools of rich tax exiles etc etc etc.

I would agree that its frustrating. But its Ireland - sad anecdotal stories & "emotions" are more important than facts. I don't have a problem with the SVR holders. Let them fight their corner.

 

[Daffodils]

I think that is a fundamental issue.
SVR customers are not subsidising trackers but rather they are subsidising people failing to pay the mortgage.


.

If banks can't spread their overheads and their cost of risks to tracker mortgages and are passing these costs to SVR mortgage holders, then SVR holders are paying for costs that should have been spread to all of the banks mortgages. I don't see how this isn't considered 'subsidising'. Tracker mortgages aren't risk free, banks made the mistake of thinking that their costs of funds were related to Ecb rates and are now criticising SVR holders for assuming the same. We all know now that this isn't the case now but it was not something the bank or I expected when taking out my mortgage. I don't see how a bank being able to pass on all losses made by another product and all risks associated and overheads associated with mortgage lending to SVR holders is fair especially as this was not highlighted or expected when taking out my mortgage

 

[Brendan Burgess]

I have been very clear that we need to deal with deliberate defaulters in a tough manner. In fact, after the meeting, a guy approached me to say that he was not going to attend the meeting, as he saw me as a spokesman for the banks. He checked with a friend, who confirmed the guy's view of me.

And I have argued that mortgage rates at higher LTVs do need to be higher because of the additional risk due to our failure to tackle defaulters. But I would reckon should only account for a maximum of 0.5% more.

There should be no premium at all for 60% LTV mortgages. The cheapest mortgage in Ireland is about 3.5%. The average across the Eurozone is around 2.09%. If that is the average, the rate for low loan to value mortgages is probably down around 1.5%. So even after removing the risk, borrowers are still paying 2% more than they should be.

Irish banks are fleecing customers because they can. They would stop fleecing some customers if there were competition in the market place. But we have been waiting for a new entrant and it has not happened. So we must change the legislation to give the CB the power to control interest rates. Hopefully, they will never have to use it. But if Danske were to raise the rate to 10% tomorrow, there is absolutely nothing anyone could do about it.

Brendan

 

[Raging Bull]

Lets take an international comparison Spain . They have plenty repossesion there too and a lot of unsellable properties. From what I can see they charge Euribor plus between 1 to 2% This means that we are still almost 2% higher. Sure repossessions have an impact but the percentage of those in trackers vs arrears is substantially higher.

It simply goes back to a cartel charging these rates because there is no competition, they can and we are seen to be easy prey.

 

[Sarenco]

I have been very clear that we need to deal with deliberate defaulters in a tough manner. In fact, after the meeting, a guy approached me to say that he was not going to attend the meeting, as he saw me as a spokesman for the banks. He checked with a friend, who confirmed the guy's view of me.

And I have argued that mortgage rates at higher LTVs do need to be higher because of the additional risk due to our failure to tackle defaulters. But I would reckon should only account for a maximum of 0.5% more.

There should be no premium at all for 60% LTV mortgages. The cheapest mortgage in Ireland is about 3.5%. The average across the Eurozone is around 2.09%. If that is the average, the rate for low loan to value mortgages is probably down around 1.5%. So even after removing the risk, borrowers are still paying 2% more than they should be.

Irish banks are fleecing customers because they can. They would stop fleecing some customers if there were competition in the market place. But we have been waiting for a new entrant and it has not happened. So we must change the legislation to give the CB the power to control interest rates. Hopefully, they will never have to use it. But if Danske were to raise the rate to 10% tomorrow, there is absolutely nothing anyone could do about it.

Brendan

Hi Brendan

It really doesn't matter whether a default is deliberate or accidental, strategic or unplanned. If a borrower is in default under the terms of their mortgage agreement, as originated or modified, the lender should be entitled (and encouraged) to enforce their security within a reasonable timeframe and at a reasonable cost.

Trying to distinguish between "can't pay" and "won't pay" defaulters is a futile exercise.

Your argument that rates on low LTV mortgages should be materially lower than higher LTV mortgages only makes sense if these loans reflect a lower risk to the lender. This will not be the case if the lender cannot enforce their security without considerable difficulty.

Similarly, comparing secured lending rates in Ireland with secured lending rates elsewhere only makes sense if lenders can actually enforce their security within a reasonable timeframe and at a reasonable cost. If this is not the case then you might as well compare Irish mortgage rates with other unsecured lending rates (credit cards, overdrafts, etc.).

I don't disagree with the principle that the Central Bank should have the power to prevent usurious lending by banks. However, let's be clear that current SVR mortgage rates, while certainly high relative to the cost of funds to our banks, are not in any sense usurious or extortionate. Moneylending legislation is applicable to loans with an APR in excess of 23% so this might be a logical cap to prevent usurious lending by banks.

I would have a real problem with any suggestion that the Central Bank should be given a broader power to cap interest rates. Aside from the questionable legality of any such provision, it would disencentivise any new lender from entering the market - why would anybody put their capital at risk if a regulator can subsequently impose its own view as to what constitutes a fair interest rate? It would also be completely impractical - what criteria should the Central Bank apply to determine whether or not a particular rate is fair or appropriate?

The other suggestions at the meeting all seem to boil down to State subventions of one form or another. Sorry, but I don't want my taxes spent on subsidising private borrowings.

 

[rosie]

Sarenco, are you intentionally ignoring the context of the mortgage crisis in Ireland? I find your posts disingenuous in this regard.
We took out a mortgage on a small 3 bed family home in 2006 with a small amount of equity from the sale of our first home. Because we were not first time buyers the stamp duty was €38,000. Our mortgage was granted on a projected income of 3 years. A little over three years later, not only were we not earning more, our income had almost halved ( both public service ). On top of the annual cost of servicing €38,000 for stamp duty we were then hit with a property charge of €600 pa. In 2008 our child was born with a disability. The therapies he needed were no longer available publicly because the government opted to invest in banks instead. We wanted to give him an intensive period of intervention ourselves and when we approached the banks for a 6 month freeze on our mortgage payments they point blank refused to help. We included the cost of private therapy in the financial statement and were contacted by the bank to enquire why we weren't using public therapies, this was IMO a perverse line of questioning under the circumstances. We have not missed any payments since 2006, however this comes at a price . We have a poor standard of living and very often cannot afford shoes, trips to the GP ect. Nights out are a thing of the past as are holidays, of course.
I put my head down and got on with it in ignorance but I have Brendan and all others involved in this campaign to thank for making me aware of the svr issue. Our income, our quality of life, our sons opportunity of early intervention was robbed by the state to support a dysfunctional banking sector. There are thousands, if not hundreds of thousands like us who's only crime was to put a roof over our families head.
However, the above is in many ways irrelevant. From what I can see, Brendan's message is simple.....the SVR is a rip off for consumers and needs to be addressed. This may be childish to you, but to families like me it will ensure a continued ability to be able to continue servicing a mortgage.

 

[Sarenco]

Hi Rosie

There is a lot in your post so I will try and deal with your general point and will then comment on your specific issues.

First off, I am in full agreement with Brendan's message that non-tracker mortgage rates are a rip-off for customers and need to be addressed. What I find childish is the reliance on emotion and general foot stamping to advance an argument without any recognition of, or attempt to address, the underlying reasons why we have high mortgage rates.

The reason we have high mortgage rates is largely the result of government and regulatory policies that are designed to defer the resolution of long-term mortgages arrears. I find it frustrating that this simple fact is ignored by the SVR campaign, which seems to me to have become nothing more than yet another noisy vested interest group. I think this is a real pity as their core message is entirely reasonable.

Turning to your own circumstances, was there a particular reason you didn't take out a tracker mortgage in 2006? How do you have an annual cost of servicing your stamp duty - did you borrow this amount? I am unclear how your income almost halved in three years - cuts to public sector pay were nothing like that severe - did you or your OH stop working? I wasn't aware that any particular therapies were terminated by the HSE but I don't see why you think a query in this regard is "perverse".

I obviously sympathise with your circumstances but banks are not charities and have no responsibilty to the wellbeing of your family. That might sound harsh but that's the reality.

Given that you have managed to keep up with your scheduled mortgage repayments, albeit with considerable difficulty, I am surprised that you do not seem to find it problematic that many thousands of borrowers have failed to do likewise, without any apparent consequences.

 

[Dermot]

I do not have any doubt that if repossessions were more easily obtained and obtainable at a reasonable cost that the SVR rate would be much lower here and we would more than likely have a new entrant to the market to increase competition. As it is we have less competition in the market than ever. I will say it again that if repossessions were more easily obtained that it is very likely that SVR rates would be lower resulting in more people capable of paying their mortgages in full. It would make life a bit more bearable for people like "rosie" above who are making a lot of sacrifices to keep their mortgage up to date. People who are trying very hard are not being done any favours by the "Gorse Hill" type mentality in fact it is the opposite.

 

[rosie]

Sarenco, if there was no stamp duty, my mortgage would have been €38,000 less so we ate still, in effect, servicing this cost.
As well as a combined 7 pay cuts, we also had new taxes imposed on our income including the usc and pension levy. A combination of these factors left us with approximately half of our income (disposable).
I am quite shocked that you are unaware of the cuts made to therapies in the disability sector, its has been well documented and publicised and I hope its a fair assumption to make that you have no experience of disability nor an understanding of the importance of early intervention. It is perverse that money was pulled from the disability sector to finance a dysfunctional banking sector and for them to ask why there is no longer public disability services.

 

[Sarenco]

Rosie

If I am reading the first sentence of your post correctly you are saying that the amount of the stamp duty was included in your mortgage. If that's correct then, yes, you did borrow the stamp duty.

Frankly, I am struggling to believe that the combination of public sector pay reductions, pension related deductions, universal social charges and income tax changes would have reduced your household disposable income by half. That scale of a reduction in disposable income is certainly not reflected in CSO statistics.

You are quite correct that I have no personal experience of disability services and was unaware that there had been cuts to publicly available treatments in this area. You might find this shocking but I'm not at all surprised that a bank official was similarly unaware of this fact.

Given your own experiences, do you still think it is reasonable that others can default on their mortgages without any apparent consequences?

 

[epicaricacy]

Rosie

I 100% agree that it was perverse for the bank official to ask you about your child's treatments. Any fair minded person should be able to see that.

Alfred Adler equated social interest with a sense of identification and empathy with others ...'to see with the eyes of another, to hear with the ears of another, to feel with the heart of another.' The degree to which we successfully share with others and are concerned with the welfare of others is a measure of mental health.' (Sherman & Dinkmeyer, 1987).

Unfortunately, certain people have an empathy deficit and I've found that there is little point in attempting to explain myself to that minority. Of course, this particular personality type are often the most thin skinned.

 

[martin57]

At this stage now even if repossessions were made easy for the banks I don't think they would past on rate cuts anyway
BOI is back in profit now and they are not passing on any cuts to the people that helped them out its all about greed not people.
again this good campaign starts to make progress with the banks the ECB will probably begin to start raising interest rates anyway
and do you think the banks will just rise the tracker rates first until they are they are at the same rates as the SVR rates,( and give people
on the SVR a break I don't think so).

 

[Delboy]

Lets take an international comparison Spain . They have plenty repossesion there too and a lot of unsellable properties. From what I can see they charge Euribor plus between 1 to 2% This means that we are still almost 2% higher. Sure repossessions have an impact but the percentage of those in trackers vs arrears is substantially higher.

It simply goes back to a cartel charging these rates because there is no competition, they can and we are seen to be easy prey.

In Spain they actually have repossessions, at over 300,000 at least since the crisis began....in Ireland we have a couple of hundred per year, most voluntary. That is why we're a couple of % higher than them.
So I'm not sure what point you are making re Spain.

 

[Bamocom]

Methinks the pulling strings of a power will be going into overdrive on this issue,whilst the claimed underlying reasons, for the disproportionate rate charged is plausible,it is primarily the incompetence at executive level that is the reason that near on 300,000 Families are struggling with one of the highest variable rates mortgages in Europe.Free up these families from the burden of 1.4 billion in interest payments would benefit everyone, spending that 1.4 billion on dysfunctional Banks is money poorly spent. Blaming the Svr victims for the high rates is not the answer.Roll on the election!!!

 

[rosie]

Sarenco

If I am reading the first sentence of your post correctly you are saying that the amount of the stamp duty was included in your mortgage. If that's correct then, yes, you did borrow the stamp duty.

I'm not sure why you find this so complicated. Using hypothetical figures..............I have 50k from the sale of a previous house. 200K for purchase of new house. Stamp duty is 38K so the actual cost of the house is 238K as opposed to 200K . If there was no stamp duty My mortgage would only have been 38k less as I would have used the money to pay off some of the house price . I am paying at SVR so the actual cost of stamp duty is much higher .

Frankly, I am struggling to believe that the combination of public sector pay reductions, pension related deductions, universal social charges and income tax changes would have reduced your household disposable income by half. That scale of a reduction in disposable income is certainly not reflected in CSO statistics.

Frankly, if you rely on cso 'average' figures for your information , you need to reconsider your position in responding to posts such as mine. The pension levy and USC alone account for a 15% deduction from my wages, changes to PRSI and changes in tax bands/ credits and 4 pay cuts, along with a new property charge easily bring the take home pay to half of what it was.

You are quite correct that I have no personal experience of disability services and was unaware that there had been cuts to publicly available treatments in this area. You might find this shocking but I'm not at all surprised that a bank official was similarly unaware of this fact.

Yes I do find it shocking, I am not aware of any adult who is unaware of the huge cuts the HSE has endured and the knock on effects it has had. Again I would question your choice to respond to posts such as mine if you are so out of touch with reality.

I obviously sympathise with your circumstances but banks are not charities and have no responsibilty to the wellbeing of your family. That might sound harsh but that's the reality.

No that's not the reality, they are charities funded by Irish tax payers. I had no responsibility to fund banks and investors but I was not given a choice. So please do not discuss the wellbeing of my family and pretend that we have a normal banking sector

Alfred Adler equated social interest with a sense of identification and empathy with others ...'to see with the eyes of another, to hear with the ears of another, to feel with the heart of another.' The degree to which we successfully share with others and are concerned with the welfare of others is a measure of mental health.' (Sherman & Dinkmeyer, 1987).

Good quote.

 

[Sarenco]

Sarenco

I'm not sure why you find this so complicated. Using hypothetical figures..............I have 50k from the sale of a previous house. I need a mortgage of 200K for purchase of new house. Stamp duty is 38K so the actual cost of the house is 238K as opposed to 200K . If there was no stamp duty My mortgage would only have been 162K . I am paying at SVR so the actual cost of stamp duty is much higher .

Not necessarily. If there was no stamp duty (as was the case with new build houses in the past) the purchase price would simply have been higher (as was the case with new build houses during that time). I've no problem with the fact that you borrowed to pay your stamp duty but it's not correct to say that there is an annual cost of servicing your stamp duty - there is an ongoing cost of servicing your loan.

 

[rosie]

Not necessarily. If there was no stamp duty (as was the case with new build houses in the past) the purchase price would simply have been higher (as was the case with new build houses during that time). I've no problem with the fact that you borrowed to pay your stamp duty but it's not correct to say that there is an annual cost of servicing your stamp duty - there is an ongoing cost of servicing your loan.

I didn't borrow, I used money from the sale of a house, I would have used the money to reduce the cost of the mortgage, so yes this is an additional cost for us