bankers always win

The sums behind ‘taxing’ the banks into a rate cut

Yesterday we were on the Sean O’Rourke show discussing variable rates on RTE Radio. We mentioned how doubling the ‘tax’ on banks won’t actually change anything. The mechanisms were briefly covered and we got a few emails asking for clarification so here it is.

The ‘levy’ was part of the Finance Act 2014 which imposed a new annual levy on financial institutions aiming to raise €150 million per annum for 3 years.

This sum is payable on October the 20th in each year (2014-2016) and it applies to a financial institution that is the holder of an Irish (or equivalent EU) banking licence or is an Irish (or equiv EU) building society that was obliged to pay DIRT – unless the amount required to pay in 2011 was not more than 100k.

The main outcry is centred on variable rates for primary home dwellers in particular. So how much of that debt is out there?

We know there are about 300,000 ‘loans’ but the quantum of debt is €39.638m which is about €3bn …

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RTE Today with Sean O’Rourke on mortgage rates

We were speaking with Sean O’Rourke about mortgage rates, that they were falling as part of a trend and that new moves to force them down would likely not work. It came on the back of a piece by Conor Pope in the Irish Times that quoted us in the article entitled ‘New bank levy could see mortgage rates rise not fall‘.

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State sponsored split mortgages, do the sums work?

We looked at some of the recent coverage on the idea of state supported ‘split-mortgages’ and found the figures lacked integrity when calculations were made on the examples being used. It is not the ‘cheapest’ solution and it would also promote the creation of capital repayments from the state which is a wealth transfer.

There was also a figure of €925 as being the ‘cost of rent allowance’ but that figure is also wrong (at least for Kildare) which tops out at €750.

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central bank don't set mortgage rates

Can Noonan or Honohan actually do anything on variable rates? (no)

The calls to lower rates by opposition politicians such as Michael McGrath on Primetime this week is making daily headlines. Charlie Weston doing a cracking job as always bringing personal finance to the front of the paper has ensured it lead for the last two days.

This has gone from the line that ‘it’s not our place to set prices to the news broken by Martina Fitzgerald that ‘Noonan and Honohan are going to pow-wow about it’.

Don’t expect much. The official responses from both the Department of Finance and the Central Bank are below. Note in particular that Honohan makes the case for non-intervention very clear.

The email sent to both was the same:

Question: Is there any explicit power the Central Bank/Department of Finance has to compel banks to change or lower their standard variable rates? If there is can you indicate which part of any Act that the power to do …

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Primetime RTE: features Irish Mortgage Brokers on ‘rent control’, 31st March 2015

Primetime did a large piece on the property market taking it from the angle of tenants and landlords. This was a very well balanced and well thought out show which gave the views of both sides fairly. Afterwards there was a studio debate about rent controls also referred to as ‘rent certainty’.

While it can be argued that ‘control’ and ‘certainty’ are two different things, they are ultimately closely related and can cause market distortions.

Labour Senator Aideen Hayden who is also the chairperson of Threshold was there as was Karl Deeter from Irish Mortgage Brokers, David McCullagh was the presenter.

Speaking time: Aideen Hayden – 5 minutes, Karl Deeter – 3 minutes.

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RTE Drivetime ‘Talking money’, going broke in old age, 23rd February 2015

On the 23rd of February we looked at the very real issue of people going broke when they are advanced in years. This can be a problem due to bad investment performance for those who have pensions, having no pension and not having enough, or outliving your money – what refer to as having ‘too much month at the end of the money’.

We have suggestions, but as always, prudent planning is key.

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Talking Money on Drivetime RTE1: End of community rating, 16th February 2015

Sorry about the delay on the sound clips! We faced a delay in getting them recorded (all our own fault too). On the 16th of February ‘Talking Money’ was one of the early adapters of the issues surrounding the end of lifetime community ratings in health insurance. Listen in as this is going to be a very important consideration up to the end of April and inevitably there will be people caught out by it.

 

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Talking Money on RTE 1 Drivetime: Cash in pensions for the over 55’s, 9th February 2015

On the 9th of February in the ‘Talking Money’ segment of  RTE 1 Drivetime show Mary Wilson had us in to discuss some changes that were coming down the line in the UK for the over 55’s regarding their pensions. This will have an effect on thousands of Irish people and we considered that as well as whether or not the move was a good idea or not.

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