Mortgage interest rates then, now, future...

mariaalice

I remember when interest rates were 12% but the thing to remember at that time mortgage lending was was very strict both on the amount lent and on the size of the deposit.

The type of variable rate mortgages we have in Ireland are really only suitable for a minority of people, we need mortgages with long term fixed interest rates of 10 or 20 years coupled with a strict ban on re mortgaging to cover other debts, nor should homes be used as a guarantor for any business loan.

A home is a home and should not be seen as a form of wealth.

eigrod

It really annoys me lately to hear on the National News announcments such as "Good news on the way for mortgage holders" in relation to a possible ECB rate cut (as I heard this morning).

For those of us on variable rate mortgages, it's not good news. It's good news for the institutions that we are with, as they will absorb the reduction, but nothing in it for the consumer.

moycullen14

eigrod wrote: »

It really annoys me lately to hear on the National News announcments such as "Good news on the way for mortgage holders" in relation to a possible ECB rate cut (as I heard this morning).

For those of us on variable rate mortgages, it's not good news. It's good news for the institutions that we are with, as they will absorb the reduction, but nothing in it for the consumer.

Fair point. In fact, every decrease in ECB rates means an increase in the SVR at the moment - to help 'subsidise' the loss making trackers. For SVR holders, increases in the ECB rate would be a good thing. Such are the times we live in.

On another note, I've started to listen to Radio 4 again as I cannot take another minute of the abortion referendum. Two interesting reports today and yesterday about mortgages and banks. The first was scathing on BOI's effort to extract itself from their tracker mortgages in the UK (deplorable behaviour) and the other on the danger of interest only mortgages. Critical, well-balanced pieces that we can only dream of from RTE (rant over).

gaius c

Farmer Pudsey wrote: »

It is hard to see intrest rates rising in the next two years. In general it may be 2016 before the EU rate hits 2% again. You would expect that the EU economy would have recovered somewhat by then and that there might be a bit of inflation.

It may well be nearly 2020 before the EU economy could sustain intrest rates of 4%.

It doesn't really matter what ECB rates are. Irish banks will stick the rates at whatever level want/need to and the market is so rotten that no foreign bank will come in.

gaius c

moycullen14 wrote: »

Fair point. In fact, every decrease in ECB rates means an increase in the SVR at the moment - to help 'subsidise' the loss making trackers. For SVR holders, increases in the ECB rate would be a good thing. Such are the times we live in.

On another note, I've started to listen to Radio 4 again as I cannot take another minute of the abortion referendum. Two interesting reports today and yesterday about mortgages and banks. The first was scathing on BOI's effort to extract itself from their tracker mortgages in the UK (deplorable behaviour) and the other on the danger of interest only mortgages. Critical, well-balanced pieces that we can only dream of from RTE (rant over).

It's not just the trackers. They are subsidising those not paying their mortgages too.

Galwayguy35

I can understand recent mortgage holders being annoyed at getting hammered with interest hikes but there is no reason to point the finger at tracker holders, during the boom most people had a choice to take a tracker but many chose not to.

Godge

Galwayguy35 wrote: »

I can understand recent mortgage holders being annoyed at getting hammered with interest hikes but there is no reason to point the finger at tracker holders, during the boom most people had a choice to take a tracker but many chose not to.

Very true, I am aware of someone who was moving house and was offered less money but a tracker from one bank and variable rate but more money from another. He took the extra money and the variable rate, spent the extra money on a car and is now in negative equity struggling to meet his repayments with a depreciated car. These are the type of people who expect the rest of us to bail them out.

recedite

moycullen14 wrote: »

Fair point. In fact, every decrease in ECB rates means an increase in the SVR at the moment - to help 'subsidise' the loss making trackers.

I received a letter from the EBS today informing me of a 0.25% increase in my standard variable mortgage, while on the radio I hear the ECB has at the same time reduced the base rate by 0.25% :mad:
That pushes the EBS rate up to 4.58% .... a staggering 916% mark-up on the ECB base rate.
But I don't believe the banks are "losing money" on trackers. If they hand in the mortgages to the ECB as collateral, they get money at 0.5%. Then they lend it out to the consumer at a 1.1% guaranteed surcharge to the base rate. If they can't profit from that, they are grossly inefficient and paying themselves too much. The bankers are bleeding this country dry.
As soon as this banking union directive comes into force I'll be on the plane to Germany to look for a loan at a reasonable rate.

eigrod

recedite wrote: »

I received a letter from the EBS today informing me of a 0.25% increase in my standard variable mortgage, while on the radio I hear the ECB has at the same time reduced the base rate by 0.25% :mad:

They knew it was coming. That's why they got in their first. A double win for the EBS.

eigrod

Galwayguy35 wrote: »

I can understand recent mortgage holders being annoyed at getting hammered with interest hikes but there is no reason to point the finger at tracker holders, during the boom most people had a choice to take a tracker but many chose not to.

I think most people are pointing the finger at the lending institutions, not the people on trackers.

gaius c

Galwayguy35 wrote: »

I can understand recent mortgage holders being annoyed at getting hammered with interest hikes but there is no reason to point the finger at tracker holders, during the boom most people had a choice to take a tracker but many chose not to.

As long as the tracker holders are keeping up their end of the contract, they are doing nothing wrong. It's the people on their own "personal trackers" - ECB rate goes up/down => I pay nothing anyway so who cares that are the real problem.

The arrears are the real problem. Rates are going up because the people still paying need to pay for themselves AND the people not paying at all.

recedite

If someone is in negative equity, I wouln't blame them at all if they stopped paying. If the lender has overestimated the amount of security in the property, then the lender will take a hit if they try to repossess and sell it. The lender has made a mistake in estimating the loan to value ratio. The lender should be honest and admit that all the other customers/borrowers are being made to pay for their own stupid mistakes. Its no way to run a business.
Anyone repaying a tracker is paying with interest, and is contributing to the lenders profits.

johnr1

gaius c wrote: »

As long as the tracker holders are keeping up their end of the contract, they are doing nothing wrong. It's the people on their own "personal trackers" - ECB rate goes up/down => I pay nothing anyway so who cares that are the real problem.

The arrears are the real problem. Rates are going up because the people still paying need to pay for themselves AND the people not paying at all.

I'd agree there is a good bit of the "fcuk em, I'm not paying cos my house is now worth fcuk all anyway" going on, but equally, there are people who are in arrears due to job loss/own business closure who currently can't pay but who will again along with all the surcharge interest accrued. I know this because I WAS one last year. I now have work again and have cleared my arrears and am ahead with my payments.

The first group need to be bankrupted and liquidated, but the second group need some time, albeit with strict limits. The distinction has to be made.

gaius c

johnr1 wrote: »

I'd agree there is a good bit of the "fcuk em, I'm not paying cos my house is now worth fcuk all anyway" going on, but equally, there are people who are in arrears due to job loss/own business closure who currently can't pay but who will again along with all the surcharge interest accrued. I know this because I WAS one last year. I now have work again and have cleared my arrears and am ahead with my payments.

The first group need to be bankrupted and liquidated, but the second group need some time, albeit with strict limits. The distinction has to be made.

That's fair enough and I don't have a huge problem with making such distinctions. Fair play to you btw.

recedite wrote: »

If someone is in negative equity, I wouln't blame them at all if they stopped paying. If the lender has overestimated the amount of security in the property, then the lender will take a hit if they try to repossess and sell it. The lender has made a mistake in estimating the loan to value ratio. The lender should be honest and admit that all the other customers/borrowers are being made to pay for their own stupid mistakes. Its no way to run a business.
Anyone repaying a tracker is paying with interest, and is contributing to the lenders profits.

Sounds lovely except for the bit that other people have to pay for them not paying and negative equity on it's own is no excuse for not repaying your mortgage.

barryfishir

Hi guys sorry to hijack the thread,just wondering what people think of increasing payments on a tracker mortgage now the rates are so low,is it an advantage we have 110,000 left to pay at monthly 580 euro at current rates.Thanks

Farmer Pudsey

barryfishir wrote: »

Hi guys sorry to hijack the thread,just wondering what people think of increasing payments on a tracker mortgage now the rates are so low,is it an advantage we have 110,000 left to pay at monthly 580 euro at current rates. Thanks

Are you comfortable with the payments. You will never get money this cheap again as in a variable at around 1% with the ECB rate. I would save the money in another account and leave it there if you have an issue in 2-3 years you could either pay money off it or use it to help make payments for a while. No point in paying off money that is costing less than 2% and having to borrow in a year or two at 5-6% maybe for a car loan or longer term for college fees if you have kids.

barryfishir

Hi thanks for advice yes we ok with repayments that why thinking to increase and pay off mortgage quicker.Understand what you saying about getting better interest in savings account and then proberly pay off lump sum in the future!!!

Farmer Pudsey

barryfishir wrote: »

Hi thanks for advice yes we ok with repayments that why thinking to increase and pay off mortgage quicker.Understand what you saying about getting better interest in savings account and then proberly pay off lump sum in the future!!!

It is not just getting a better interest rate in a saving account. You will never borrow money as cheap again. Do not leave your self in the situation where you need to borrow money for a car at 10% in 2-3 years time when you could have the price saved. You have a chance to create a situation where you will not need to borrow high interest money so why give money back to a bank that is costing you virtually nothing.

Also if in 3-5 years time you have a lump of money say if you saved 50/week for five years that would give you over 13K the banks might discount you for paying a lump sum off the loan.

Godge

Farmer Pudsey wrote: »

It is not just getting a better interest rate in a saving account. You will never borrow money as cheap again. Do not leave your self in the situation where you need to borrow money for a car at 10% in 2-3 years time when you could have the price saved. You have a chance to create a situation where you will not need to borrow high interest money so why give money back to a bank that is costing you virtually nothing.

Also if in 3-5 years time you have a lump of money say if you saved 50/week for five years that would give you over 13K the banks might discount you for paying a lump sum off the loan.

Or if interest rates go up and the tracker increases as a result giving additional payments, you will have a lump sum to pay off to reduce the payments back down.

barryfishir

Thanks for advice money proberly better off under the bed than in the banks pocket!!!!

Farmer Pudsey

barryfishir wrote: »

Thanks for advice money proberly better off under the bed than in the banks pocket!!!!

I would not advise anyone to keep large sums of money in cash at home. The walls have ears.

Scortho

barryfishir wrote: »

Thanks for advice money proberly better off under the bed than in the banks pocket!!!!

You won't get any interest though. In fact you'll lose money with inflation.

beeno67

mariaalice wrote: »

I remember when interest rates were 12% but the thing to remember at that time mortgage lending was was very strict both on the amount lent and on the size of the deposit.

.

Lending was not that strict. People regularly got mortgages of 3-3.5 times income. So, a person earning 30k could reasonably expect a mortgage of 100k or so. However at 12% interest there is no way a person earning 30k could have repaid 12k a year on the interest alone. That's 40% of per tax income on interest alone.

Similar to someone earning 30k a year on a 1% over ECB tracker getting a mortgage for €350,000!! It seemed ok only because the period of such high interest rates lasted a short time.