gnf_ireland
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Brendan mentioned yesterday and in the papers as well this morning relating to Section 7 - treating new customers and existing customers equally. It is a few lines which would make a large difference to a reasonable number of customers.
All businesses operate by segmenting customers and by offering marketing incentives to prospective new customers.
Agree they are different, but the banks appear to categorise them into PDH/BLT and LTV rate bands. Once in this category, you should be treated equally.The circumstances of every borrower are different so how can a lender be expected to treat different cohorts of borrowers equally?
@Sarenco is this not as simple as a law requiring a bank (or any institution) to make current offers available to all customers (new and existing) on the basis that they qualify for them?
How do you determine what constitutes the qualification criteria and then define it in statute? There are numerous, every varying, factors that go into every individual underwriting decision.
This is a ridiculous suggestion. All businesses operate by segmenting customers and by offering marketing incentives to prospective new customers. You're suggesting this should be illegal in the case of mortgage banking? Wow.
@T McGibney Ok, so how would you propose to handle the issue of the customer with a SVR with bank ABC who signed up in say 2011 and now paying 4.16% with a LTV of 65% who cannot switch should be handled. Lets say they now have 2 young kids so childcare costs exclude them for switching. The same bank offers 3.36% to a new customer on the same LTV.
Or are they just a casualty of the process and they have to wait until they are in a position to switch and speak with their feet?
The difference between groceries and mortgages is you can walk into Tesco tomorrow morning and buy a bag of apples for €3 euro. Its a once off transaction and has no relevance on the time you go to buy the second one a week later. You can go into any store at that point and pay anything from €1 to €10 for a bag of apples. You are not restricted to going into Tesco alone.
Imagine if Tesco dropped the price of the apples to €1, and you went in to buy them. You were charged €3 because you paid €3 last week, and the customer behind you is charged €1 for the same apples, and the same pattern goes on for the next 25-35 years.
I fully appreciate that legislation is not ideal here and would be completely unnecessary if banks acted somewhat reasonable in this area. But they are not, and customers of the banks are being screwed by the same people that bailed them out (and I can assure you are am not a left wing type person).
So straight out - how would you fix the above situation or would you do nothing and let them continue to be overcharged?
@T McGibney
The difference between groceries and mortgages is you can walk into Tesco tomorrow morning and buy a bag of apples for €3 euro. Its a once off transaction and has no relevance on the time you go to buy the second one a week later. You can go into any store at that point and pay anything from €1 to €10 for a bag of apples. You are not restricted to going into Tesco alone.
Imagine if Tesco dropped the price of the apples to €1, and you went in to buy them. You were charged €3 because you paid €3 last week, and the customer behind you is charged €1 for the same apples, and the same pattern goes on for the next 25-35 years.
I fully appreciate that legislation is not ideal here and would be completely unnecessary if banks acted somewhat reasonable in this area.
Competition is the only way to ensure that service providers don't rip off captive customers. The more the State, and more particularly politicians, seek to micromanage a market, the further that market creeps towards an oligopoly that perpetuates the ripoff.
Competition helps new customers and customers who have one off transactions and have the choice to go elsewhere the next time. Agree 100%
Most people have mortgages for 25-35 years, and very rarely switch them. Even those who want to switch, a lot of them cannot. You also have to qualify for a mortgage and go through a legal process to acquire one, which costs in the region of 1.5k.
Tesco is an excellent example, in that a major plank of their retail strategy is providing selective incentives to long-term and repeat customers via their clubcard offers, in addition to cross-selling discounts for those who buy both motor fuel and groceries from them.
QED. Solve the latter and you solve the former. And the legal costs will come down too.
As I asked above, how do you propose to help the above category of customer? Competition/switching does not solve their issue? Same with negative equity customers?Ok, so how would you propose to handle the issue of the customer with a SVR with bank ABC who signed up in say 2011 and now paying 4.16% with a LTV of 65% who cannot switch should be handled. Lets say they now have 2 young kids so childcare costs exclude them for switching. The same bank offers 3.36% to a new customer on the same LTV.
So straight out - how would you fix the above situation or would you do nothing and let them continue to be overcharged?
And those who cannot switch ? What about them?
I've already told you.As I asked above, how do you propose to help the above category of customer? Competition/switching does not solve their issue? Same with negative equity customers?
The difference though is each transaction in Tesco (or any supermarket) is once off - a mortgage is a 25-35 year commitment where you are locked into it unless you have the ability to switch and not everyone has.
I think there is a difference between the principle of treating new and existing customers equally and saying they have to be identical.
For example, I have no issue with KBC offering a current account discount of 0.2% on a mortgage rate if you have mortgage and current account with them, as long as it applies to all customers equally. I have no issue with any bank offering a customer one 'free month' every 5 years of their mortgage if they have never missed a payment for the previous 5 years, as long as it applies to all customers equally.
I don't have issues with cross selling or incentives at all - as long as they are not restricted to getting customers in the door and then screwing them.
Maybe I am being a bit thick here, but I cannot see how you have answered it. I see you repeat competition will sort the issue out, but how will it sort it out if they cannot switch?I've already told you.
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