Irish Mortgage Brokers Blog

This is the usual update of rates available at the moment. As you’ll notice, AIB is the leader in almost every section. However, they are not necessarily lending to every client hoping to obtain finance with them - to know if they’ll be the lender of choice you need to construct the application in a manner that will ensure it shows the best aspects of the case to them.

There are lots of other lenders out there too (we deal with the pillar banks and many others as well), so looking at ‘best rate’ is perhaps different than ‘best attainable rate’.

Anyway, here is the list, if you ever want mortgage advice give us a call! 016790990

Best variable rate mortgage: AIB 3.24% (with one for 2.84% < 50% LTV)

Best 1yr fixed rate mortgage: AIB 4.15%

Best 2yr fixed rate mortgage: PTsb 3.1% < 50% LTV, otherwise AIB 4.65%

Best 3yr fixed rate mortgage: AIB 4.88%

Best 5yr fixed rate mortgage: PTsb 3.7% < 50% LTV, otherwise its AIB 5.35%

Best 10yr fixed rate mortgage: n/A 12/2011

Oh, one final thing, AIB called everybody into a meeting at their head office about two weeks ago, the resounding message was that they are going to be lending more in 2012 but prudence will remain and prices will change (upwards to more comparable market rates).

We took part in TV3’s Property Watch again this month, when we covered the topics of price drops and the reaction to the ESRI study which looked at the forecast for property in 2012.

We were talking about personal finance coming up to Christmas on The Morning Show with Sybil & Martin last week. Research has shown that between €550 and €900 euro is the average spend, making it a very expensive time of year. We gave the viewers some very simple ideas that should make it a little easier to avoid the new year blues by spending wisely in December!

There are often calls for stricter regulation, in particular the idea that in the US they arrest people in banks with greater ease/faster (which is in itself not ‘regulation’ it is policing). Anyway, I thought it was worth mentioning that in the US it isn’t a ‘one Regulator fits all’, and that the problems we had in the past through division of regulatory responsibility [splitting Central Bank and Regulator] still exist there.

Below is a graph of how responsibility is divided out in America.

As you can see, the OCC takes care of national banks, then the very popular state & community bank sector is elsewhere. Taking State banks in particular, they either have access to the Federal Reserve or not, if they do they are SMB and the State Authority and Fed are the regulators, if not then they are SNMB and the State Authority and the FDIC are the regulators.

That is why you hear about the FDIC ‘going into banks’ - these are state banks that are at risk. The national banks would be more in the OCC/SEC/Fed sphere of influence. Just an interesting point, because the US still has divided regulation and that is sometimes cited as one of the issues that saw the credit crunch occur without warning.

Yesterday the Examiner broke a story about tracker mortgage holders potentially missing out because they are not reading their terms and conditions. This is an issue we have seen first hand in our company, but it wasn’t due to not reading the terms and conditions, it was down to a bank error.

Recently Bank of Ireland had to put 2,000 accounts back on trackers after they mistakenly took them off and onto variable rates. AIB made the same mistake 214 times and PTsb did it 53 times.

In our own brokerages case we saw something similar recently with PTsb, they insisted to a client that no tracker was available. Then, only after the client remortgaged did they admit their error and offer it back. We represented the client in this case and insisted that all costs were also covered in reinstating the mortgage. This means paying solicitor fees, losses on clawbacks, breakage fees for the fixed rate undertaken etc.

Where this happens has tended to be where people come off of fixed rates and in their ‘rate choice letter’ (a letter you get c. 60-90 days before fixed rate expiration) the tracker is not mentioned. Several banks have made this error and thankfully it is becoming more rare as internal audits have identified and remedied the problem in many cases.

Our advice is (as per interview with Newstalk today) to write a short letter if you are coming off a fixed rate to your lender and ask ‘is a tracker available, if not then please point out the clause that indicates this and why’. This should at least ensure that your loan gets a diligent ‘once over’ by the lender who should be able to tell without doubt what the situation is once they go through your paperwork.

John Finnerty interviewed us about the PTsb story that was in the Sunday Business Post.

We touched on this topic over on MyHome.ie last Friday in our weekly blog contribution to their site.

It is important to look at this from a few perspectives

1. Regulation and the role of the Regulator
2. Past decisions by the Regulator
3. Politics and policy

1. Regulation and the role of the Regulator: The idea of regulation is not for price control, rather it is about prudential control. As galling as it seems to everybody, the Financial Regulator is not (nor should they be) empowered to tell banks what prices they can charge. This is sickening given that we have spent €10,000,000,000 this year alone via the NPRF in supporting our banks (€8.8bn to AIB and €1.2bn to Bank of Ireland).

Readers, if you know of other jurisdictions where regulators set prices please let us know! The idea of a Regulator is that you pay for them in return you get the avoidance of systemic risk, that is the fundamental reason for their existence and for bearing the cost of having them. The same way that we pay for police in order to have a safer society where there is consequence of actions.

That our regulator has failed and was unfit for purpose is a given, however, placing new powers in them that can force banks to charge certain prices is utilitarian - where the end justifies the means - rather than fair and prudent. If we are to sell our banks they must be profitable, higher rates are one route to that (the others are dropping deposit rates and firing staff).

No investor will want to buy an Irish bank if they cannot control their own pricing, even if pricing is controlled and certain promises given or undertaken not to meddle in the future, the first time you do so it destroys your credibility. And that is where Government erred. They thought that the warning of a stern telling off would make banks change their ways.

It failed, leaving the Taoiseach with egg on his face and the banks with a reputation as bad as ever, while the ball is now in the Regulators hands as they were asked to ‘let the Government know if they need extra powers’.

[Irish Times] “Mr Elderfield has previously stated that his powers of intervention are limited when it comes to forcing the banks to pass on mortgage rate cuts. The Government’s legal advice is that the roles of the regulator and of the Central Bank are independent and the Government cannot direct him to take action.

A source said it has instead “invited” him to consider the outcome of the meeting and, if necessary, make a request to Government for additional powers.

Mr Gilmore denied the Government was powerless in the matter. “No, this has some way to run yet . . . we will take further action if necessary,” he said.”

2. Past decisions by the Regulator: It is interesting to note that the argument about rate setting has already been raised with the Regulator, only it didn’t make headlines the last time. The complaint was via the Professional Insurance Brokers Association and the basics were that ‘dual pricing’ (where prices vary according to distribution channel) was wrong and should be prevented.

The regulator said and did nothing about this, their return comment was that ‘The Regulator has no input into pricing by banks’. So if that precedent is anything to go by then they will not intervene this time either. And that is the key issue- Kenny has passed the ball to the Regulator and now they will be the ones to be made to look bad by appearing impotent. Or worse yet they will seek powers that will make the financial services vista even worse in Ireland.

If the Regulator does get involved in pricing issues it will open a larger can of worms than presently expected, next of all people will dispute their TVR’s based on LTV’s, brokers can bemoan dual pricing etc. etc. It is a downward vortex when you make a Regulator responsible for pricing.

3. Politics and Policy: It is not disputed that people are unhappy, upset and morally outraged at banks getting a cut in cost and not passing it on. However, this is primarily perceived rather than real, because banks are paying more for money than they have existing loans out at (for the most part, and largely due to the 400,000 tracker loans out there).

The question we are asking though is ‘what part of politics requires price intervention?’. The natural byline is ‘well we had bank intervention?’, that that is true (we made a mistake in how we did it, a big one), but mistake ‘A’ is not a justification or foundation for Mistake B if you operate on a rational case by case basis. Furthermore, the likes of AIB who are ‘the bad guys’ are still more than 2% cheaper than PTsb who did pass the rate cut on! So should politicians risk any political collateral they have on diving into this?

Why instead are they not fighting the most expensive providers and asking them to come in line with more competitive banks, this ‘pass the rate cut’ is all about the appearance of power, and the flexing of muscle rather than about genuine leadership and policy, sadly it would seem that our leaders are willing to spend considerable equity in optics when the results are unlikely to be forthcoming.

Perhaps the most pertinent question is ‘what are they hoping to achieve?’.

In this piece we were speaking to Sybil & Martin about the banks passing on rate cuts and what to do if you got flooded recently.

In this piece by Stephen Murphy of TV3 we spoke about the issue of Regulators enforcing pricing and the fact that it is not a common practice.

This piece by Claire Brock of TV3 was about Mario Draghi’s unexpected rate cut of 0.25% last Thursday.

The debate about whether or not it will be passed on still rages. We spoke about that particular issue the following day on both LMFM and Newstalk.