Bank of Ireland tracker mortgage % increase

Thrugelmir

chapter2 wrote: »

I very much doubt that these reasons are covered by the 'special terms and conditions' which are referred to, but which did not appear in my contract.

The entire UK banking system was 48 hours away from going under in October 2008. The new Basle 3 banking requirements are a direct consequence of this and similar problems globally. So exceptional enough to force banks to change lending policy.

Jimbo1976

Thrugelmir

You are right that things were dire in October 2008, but things look a lot more healthy now. The credit markets have eased. There are some securitisations going on. The Funding for Lending Scheme has pushed savings rates down so whilst BoI is taking not part in the scheme all of its major competitors are so as they have to access cheap funding for their mortgages via the FLS so they have reduced the rates they pay to savers. So to comepte BoI does not have to pay savers as much. BoI operates the Post Office Savings Scheme, so that should keep a healthy level of savings flowing in. So why is it now choosing to make the increases?

You mention Basel 3 but the decision was taken earlier in the year to defer it by it by 4 years and to allow banks to use a wider range of assets (including securitised mortgages) with the liquidity coverage ratio. So the situation for banks looks a lot more benign now than it did a couple of months ago.

I would agree that there were exceptional conditions in 2008, but these are long over. BoI has survived up until now.

If it is so desperate to build up capital now to keep regulators happy why is it now offering 90% LTV best buy loans to FTBs?

Thrugelmir

Jimbo1976 wrote: »

I would agree that there were exceptional conditions in 2008, but these are long over.

This years results from the banking sector suggest otherwise. Excluding HSBC and Standard Chartered the banking sector seems far from being in good health. With additional capital reserves being the priority for many. So the effects of unwinding the credit boom will continue for some years yet.

Jimbo1976

Correct me if I am wrong but most of the poor banking results seem to be linked to PPI provisions and redress for poor conduct, LIBOR, Interest Rate Swaps etc.

Strip those out (as they are one time items) and things looks pretty good. 3-month LIBOR (which is the index used to measure how much banks charge each other for borrowing money) is less than 0.51%. LBG (which has huge exposure to the UK housing market) shares are up from 47p to about 51p over the last 3 months, Barclays up from £2.55 to £3.17, even RBS the worst performing one is flat at about £3.

Former_MSE_Guy

Hi folks, we've published an interesting opinion from prominent consumer lawyer Mike Dailly, from the Govan Law Centre, on this...

Read the full story:

'Fight Bank of Ireland's unfair mortgage hike'

Click reply below to discuss. If you haven’t already, join the forum to reply. If you aren’t sure how it all works, read our New to Forum? Intro Guide.

Thrugelmir

MSE_Guy wrote: »

Hi folks, we've published an interesting opinion from prominent consumer lawyer Mike Dailly, from the Govan Law Centre, on this...

Article appears to be more of a personal opinion on bank lending than a legal opinion on the contractual issues that lie at the heart of the matter.

jamesd

That opinion piece appears to summarise a key issue very well:

"We will only increase the differential under this paragraph if we believe the increase is necessary to maintain the viability of our business"

"BoI explains its UK mortgage business is strong and not in any financial difficulty"

So BoI is at one point claiming that it is at new risk of insolvency - a non-viable business - and at another claiming that it is not.

BoI does have alternative approaches available. It can do as some other lenders have done and offer financial incentives to those with unprofitable or undesirably risky mortgages to leave, instead of using a punitive interest rate. That would be expected to cause those who can leave economically to do so, leaving those who have some disadvantaged position remaining and protected by the FSA rules about mortgage prisoners.

Thrugelmir, the plain language of the contract is about viability of the business and that implies a clear, imminent and provable risk to solvency that can only be addressed by making a major change to the product terms. Merely being unprofitable for some loans isn't a failure of viability for a business. So I wonder how many more months the bank can surrvive without becoming insolvent if this change is not made. A consumer lawyer's opinion is perhaps more than simply personal opinion.

Thrugelmir

jamesd wrote: »

It can do as some other lenders have done and offer financial incentives to those with unprofitable or undesirably risky mortgages to leave, instead of using a punitive interest rate.

BOI(UK) is a separate business to the Eire operation. So will need to maintain reserves in line with its asset lending book. The higher the risk profile the greater the reserves required to comply.

The BOI has for some time being offering incentives. Around 10,000 mortgages have been sold to the Mortgage Works previously as well.

Like NRAM what's left in the barrel is increasingly the business that nobody wants. The self certified income, high risk BTL etc.

BOI (UK) I would suggest is looking to build reserves for the years ahead to cover the costs of winding up the mortgage book. Which will become increasingly expensive to run or for which it will receive pence in the pound to dispose of.

armour

Isn't BoI uk running the post office's mortgage operation now, loaning 60%LTV at 2.74%. How does that stack up with the need to maintain the viability of their business.
Surely they can't be allowed to renage on their current agreements and at the same time attract new business with market leading rates.

Thrugelmir

armour wrote: »

Isn't BoI uk running the post office's mortgage operation now, loaning 60%LTV at 2.74%. How does that stack up with the need to maintain the viability of their business.
Surely they can't be allowed to renage on their current agreements and at the same time attract new business with market leading rates.

Different Company this is a joint venture with the Post Office.

HBOS is part of the Lloyds group but is a separate Company. So trades in its own right.