Bank of Ireland tracker mortgage % increase

jamesd

Thrugelmir wrote: »

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

If the customers can't move because nobody wants them, the FSA regulations mean that it'd be likely to be a TCF breach to exploit that by using penalty rates on them.

Thrugelmir wrote: »

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.

Maybe so. If a bank wants to sell a loan book at a lost, that's simply a business transaction and not something the borrowers should be charged for. It's pretty much inevitable that near the end of a loan book the remaining loans will be the ones in most trouble because the others will have been paid off or moved already. That's just normal lending experience and something to price in with the lending margin at loan inception. BoI should already have those reserves, accumulated from the time of inception. If it didn't lend prudently then that's a risk for the equity owners to bear.

armour

So is it that the Post Office needs BoI's banking licence?
Perhaps, if BoI goes ahead with this scam, the UK govt. could revoke it.
I wonder if that would make them think again?

Thrugelmir

jamesd wrote: »

If the customers can't move because nobody wants them, the FSA regulations mean that it'd be likely to be a TCF breach to exploit that by using penalty rates on them.

I would suggest some serious reading on the whole topic to gain a better understanding. As your comments are so far off tangent.

Thrugelmir

jamesd wrote: »

Maybe so. If a bank wants to sell a loan book at a lost, that's simply a business transaction and not something the borrowers should be charged for. It's pretty much inevitable that near the end of a loan book the remaining loans will be the ones in most trouble because the others will have been paid off or moved already. That's just normal lending experience and something to price in with the lending margin at loan inception. BoI should already have those reserves, accumulated from the time of inception. If it didn't lend prudently then that's a risk for the equity owners to bear.

Suggest you gain an understanding of how banks operate. How they are funded. Banking law which Directors are required to comply with etc. Because you seen to have considerable gaps in your knowledge.

brit1234

MSE_Guy wrote: »

'Fight Bank of Ireland's unfair mortgage hike'

No one has proved it unfair here. It is written into the contract, the clause is valid, a series of extreme events has taken place. The interest rate is still far lower when the mortgage was taken out and you have had years of extremely low mortgages at the expense of prudent savers.

I would have more sympathy if Landlords hadn't massively hiked rents despite mortgage costs being slashed. It's tenants who are the real victims here.

jamesd

Thrugelmir wrote: »

I would suggest some serious reading on the whole topic

Specifically:

"Under this provision, if the existing lender takes advantage of a ‘trapped’ borrower or treats them any less favourably than other customers with similar characteristics – for example, by offering less favourable interest rates or other terms – then this may be relied on as tending to show contravention of Principle 6 ‘treating customers fairly’."

Thrugelmir wrote: »

Suggest you gain an understanding of how banks operate. How they are funded.

Naturally a bank will try to use contract terms that allow it to change rates if it sees a business advantage from doing so, but it does have to actually comply with the contract terms and not do it when those terms don't apply. Like when there is no imminent insolvency prospect and the term relates to preventing insolvency.

Basel requirements are not very relevant to this contractual issue, since those are not about impending actual insolvency. If BoI ever does get to the point where insolvency is imminent then it'll have some reason to invoke this clause.

VT82

This so called expert can waffle on about Basel being relaxed and not coming into effect until 2019, and about cost of funding coming down, but unless he can get in there and see BoI's balance sheet, he's just talking out of his ar5e to try and sound clever.

Although UK savings rates have been tumbling, BoI's marginal cost of funding will have shot up over the last 4 years. It was once an A+ rated institution, residing in a AAA rated sovereign, benefitting from cheap wholesale funding. It is now well and truly rated junk status. It will have access to minimal wholesale funding, and the only retail savings left in there will be having to pay a good whack to keep it there.

If BoI suffers loss after loss after loss, while arrears are going up and up and up, it's capital adequacy will also be depleted to the point at which it's not a going concern. Basel being relaxed or delayed won't change this. They don't wait until it runs out of money - if it's not a going concern, it gets 'resolved'.

It's too big to fail, but Ireland's government is not strong enough to step in and support it, so a failure would be catastrophic. The FSA will probably be nudged by the UK government to let this rate change happen, just so they don't have to step in like they did with Iceland to bail out any savers caught up in it.

I'm not arguing whether or not their proposed rate change is fair or not, just saying that this expert should stick to the legal aspect, and leave the finance to the professionals.

jamesd

The trouble with that argument is, this is both a legal and regulatory discussion as well as a financial one. It's about contract terms, when they can be invoked and whether the current situation qualifies. It seems likely that given the apparent high chance of legal action, BoI is going to have to prove in court that its situation today is sufficient to trigger that clause. All of that sort of thing is a matter for lawyers and regulators as well as accountants and bankers.

The cost of funding part of the clause is easy: "following a serious adverse change in market conditions or in the relationship between the base rate and the rate which we pay on the funds we raise in our mortgage lending business". I expect that BoI might well be able to prove those parts. That leaves the additional viability portion to satisfy.

It's really hard to see how BoI can both claim that it is in no financial difficulty and that it is in sufficient financial difficulty that it has to invoke a viability-triggered exceptional conditions clause. One of those claims has to be untrue. Either it's viable and can't invoke the clause or it's not and can.

My opinion is that the no financial difficulty claim is untrue. If so, then it may well get to invoke that clause successfully, after proving it in court.

I agree about the longer term going concern issue. But the first stop there is raising the rates for the mortgage contracts that allow it without having to prove a threat to viability. The ones with the viability clause have a higher barrier that provides greater protection to the borrowers.

Pincher

If the position was reversed , and the customer had to pay 13% because BOE rate went sky high, BOI will of course voluntarily reduce it to 10% because the borrower is experiencing hardship and will go bankrupt or face repossession.

Or is BOI going to say, tough, hand over the keys, and off to the streets with you.

What would be interesting to know is what happened to Japan's lenders and borrowers. They must have already gone through the same thing.
Oh that's right, they did the honourable thing and committed seppuku before the shame of not paying your debt.

swardean

This is scandalous, I have only just seen this thread and had not received anything from BoI even though I have a Residential tracker mortgage (0.65 over base rate). I was massively concerned as this would really put me on the brink.

Rang the bank this morning and they said, "It doesn't apply to you you do not have the clause in your contract that allows us to do this."

Whilst I am relieved, I would still like to help anyone affected and if anyone needs me to check my documentation for some details I will do all I can to help. My mortgage was taken through B&W in September 2005. So obviously something has changed in the documentation and/or contract between these dates. If the specific clause that has been highlighted in this thread is the reason for the update, what prompted the removal of this in later loans? In my experience T&Cs get added to contracts rather than taken away unless there is a very good reason