THE CENTRAL BANK has warned mortgage lenders not to attempt to bully homeowners into giving up their tracker mortgages.
It has issued orders to banks and building societies to make the details of agreements clear and understandable to customers.
New regulations have been agreed upon by the Central Bank and the Financial Regulator to protect financial customers from exploitation. Under the new rules, lenders must engage is open dialogue with customers and alert them to the potential risks of switching from a tracker mortgage.
The Central Bank and the Financial Regulator surveyed the behaviour of banks during 2008 and 2009, and found that they had failed to communicate appropriately with their customers. They concluded that customers did not understand what they were doing when they agreed to give up their tracker mortgages.
Tracker mortgages are the safest and cheapest type of loans for homeowners.
Unlike variable rate mortgages, the interest on which can be raised at a lender’s discretion, tracker loans are fixed to the rates of the European Central Bank – which have been at the record low of 1% for almost a year and a half.
The regulator released a statement, saying: “Customers must be notified that switching from a tracker rate may mean they will lose the ability to avail of a tracker rate mortgage in the future, where this is the case.”
The Central Bank and the Financial Regulator warned financial institutions not to attempt to coerce customers to switch from safe tracker mortgages to unpredictable and expensive variable rate mortgages.
THE LATEST ESRI/Permanent TSB house price index shows prices down over 35% from 2006, the peak of the housing boom.
The index is based on agreed sale prices and is calculated based on mortgages draw down, shows the decline in the average houseprice was 1.7% from April to June. This is the lowest quarterly reduction since the 2008.
Prices have fallen by 6.4% from January – June of this year. This compares to a drop of 8.1% for the same period in 2009, but the year on year decline from June 2009 – June 2010 is 17%
The average price for a house nationally was €201,364, compared with €242,593 in Quarter 2 2009 and €311,078 at their peak.
House prices in Dublin fell by 3.5% from April-June 2010 while prices outside of Dublin fell by 0.8% in the same period.
Niall O’ Grady, General Manager with Permanent TSB said “While prices continue to fall at different levels in Dublin versus the rest of the country, this reduction in Quarter 2 is the lowest recorded quarterly fall in almost two years. This may indicate that prices are starting to find a more sustainable level after almost three and a half years of decline”
FIGURES RELEASED by the European Mortgage Federation (EMF) show that Ireland is “uniquely vulnerable” within the EU because of the prevalence of variable rate mortgages.
The EMF’s research showed that 84% of mortgages issued in Ireland in the last six months of 2009 were variable rate loans.
The research also outlined that fewer people have been able to secure a mortgage in Ireland; the number of mortgages being granted between the end of 2008 to the end of 2009 fell by 47%.
The Financial Services Ombudsman has warned that lenders should not try to coerce people to move people off tracker mortgages, following an increase in complaints about lenders offering “unsolicited inducements” to customers to switch to variable rate deals.
All Irish mortgages lenders have increased their rates over the past year between 0.5 and 1.5%. Further rises are expected – and the European Central Bank may also raise rates.
Despite the Irish situation, the European norm for mortgage deals is fixed rate. In stark contrast to the 84% of Irish mortgage holders who are on variable rate, 80% of Belgian mortgages are fixed rate for the entire duration of the loan.
Other countries offer fixed terms for the a set number of years, and some cap the variable rate to protect homeowners from potential spikes in interest.
The Irish Banking Federation has launched a consumer website www.helpinghomeowners.ie to provide information for borrowers on how to deal with repayment difficulties, how to contact their lender and other advice.
OVER 300,000 mortgage holders could be hit if Irish banks put up their interest rates.
The Irish Independent reports that AIB, Bank of Ireland, Permanent TSB and Irish Nationwide may be set to put up their interest rates by 0.5% in August. This follows the lead of EBS, which put up their rates by 0.6% on Friday last.
Over 300,000 people who are on variable interest rates will be affected if the hike is introduced. Those with a €300,000 mortgage could see repayments increase by €100 a month or €1,200 a year. Mortgage holders with tracker or fixed rate mortgages will not be effected.
Both Permanent TSB and EBS have now upped their variable mortgage rates twice in the past year, pushing rates up by 1%. This comes even though the European Central Bank has not changed its interest rates in 14months.
The Independent is also reporting that once this round of rate hikes is complete, another rate hike is expected in the coming months, bringing total hikes for the year to 1.5%.
A recent report by Moody’s showed the number of mortgage holders in arrears (who haven’t made a repayment in three months) has doubled in the past year.
The IMF, last week recommended that a banks take a unified approach to mortgage holders in arrears.
A NEW REPORT from the OECD has suggested people living in Ireland have some of the best lives in the world, with Ireland among the top countries in its Better Life Index.
The index finds that life expectancy, low pollution, positive experiences and a healthy work-life balance are among the factors that contribute to happy lives in Ireland.
It did note, however, that the gap between the rich and poor is wider in Ireland than elsewhere, while the gender gap in educational performance is also larger than average.
Today we’re simply wondering whether (assuming you live in Ireland) you’re satisfied with your quality of life.
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