ECB cuts rate to 1.25%

Gumbo

for example :

Person A : 2006

House Bought for 400,000.
Mortgage : 368,000 (92%) over 30 years.

Tracker Mortgage at 2.25% give or take.

Person B : 2006

Monthly Rent for 15 years :
Monthly Savings for 15 years :
then buy same home today for 200,000 with an interest rate of 5% for 10 years.


So its a 25 year term V a 30 year term, but the kicker is the small mortgage for 10 years with its higher interest rate.

As i said, i'd like to see proper calculations, as the person buying my house today for half what i bought for would still be paying more than me because of interest rates at present.

Bannasidhe

Just saw on Vincent Browne - according to tomorrow's Indo National Irish bank have raised interest rates by 1%. So, guess we'll see if Elderfield can actually do anything or indeed Kenny and Noonan.

kippy

kceire wrote: »

for example :

Person A : 2006

House Bought for 400,000.
Mortgage : 368,000 (92%) over 30 years.

Tracker Mortgage at 2.25% give or take.

Person B : 2006

Monthly Rent for 15 years :
Monthly Savings for 15 years :
then buy same home today for 200,000 with an interest rate of 5% for 10 years.


So its a 25 year term V a 30 year term, but the kicker is the small mortgage for 10 years with its higher interest rate.

As i said, i'd like to see proper calculations, as the person buying my house today for half what i bought for would still be paying more than me because of interest rates at present.

This is a very handy tool for getting the low down on the effects of deposits, terms and rates on mortgages. You could easily get the cold hard figures out of the site.
http://www.drcalculator.com/mortgage/
That of course doesnt take into account political schemes to incentivise/deincentivise purchasing a house at the time, nor the ease of actually getting a mortgage.
There are savings calculators all over the web(http://www.math.com/students/calculators/source/compound.htm) but there are so many different savings products that it is very difficult to get a like for like figure that you are looking for.
There are many "environmental" factors that make purchasing a house a very personalised one. Myself and my wife bought six years ago as we wanted to settle down, we bought close to work, a house that we could do what we want with and one with a (still) affordable mortgage due to a sizeable deposit we put up. We took out a 25 year mortgage with the interest subsidised by the state for the first 5 years. We've under 19 years left and the amount of the mortgage is still marginilly less than the cost of renting in the same estate.

Yeah, we've a small management fee, there are ongoing costs associated with owning a house but it suits us.
It didnt suit us a few years before (we hadnt really settled) so we rented for that time.

Cookie_Monster

Bannasidhe wrote: »

Just saw on Vincent Browne - according to tomorrow's Indo National Irish bank have raised interest rates by 1%. So, guess we'll see if Elderfield can actually do anything or indeed Kenny and Noonan.

Can't see what they can do, no reason the bank cannot raise the rates if they wish too tbh.

fliball123

Welease wrote: »

Sorry have responded..

Thats the point i am making

"They paid for filiball's houseo. a few years ago"

They did, but he didn't.. and THAT current cost is more than he is paying.. hence why banks are losing money.. Fliball hasn't paid 100% for anything yet..

so let me see if I can break this down..

I am paying my mortgage which the bank paid for in full(very important to take note of that)..Now that the banks are lending to other people who are borrowing at a higher interest rate and because I am on a tracker paying a lower rate of interest my mortgage is being subsidised?? am I picking you up correctly here??? Your also after contradicting yourself there..If they paid off my mortgage years ago how is there a current cost for my mortgage??? Answer is there is none. Your talking about the current cost of lending ... completely different there my friend

I think what you have just proven is that if the bank has paid off my loan then they are paying no more for my individual loan Correct??? Yet I am still paying this sum of money back with interest...

It is actually more correct to say that the repayments with interest that I am making on my loan is not subsidising or helping out in any other lending the bank is dealing with and not the other way around..

You have just proved my point..

And you have to look at the complete picture of a bank not just variable vs tracker.

There are the following areas where you have not touched such as

what about people on fixed rates??
what about all the bankers bonuses for signing up mortgages?
What about people who have defaulted on their mortgages?
What about people who have defaulted on other other loans?

So below I will give you an analogy and you tell me who the hell your subsidising there.

If John get a loan of 100k on tracter at say 2% interest over ECB rate say 2% and I am paying it back over say 10 years

The bank pays this 100k straight away with say at a 2% interest rate from the ECB ...So they should be making a profit after it providing I continue paying my mortgage.

Say Jimmy gets a loan of 100k on the same year over the same 10 years and slaps in a 5 year fixed interest rate of say 4%

Say Joey gets a loan of 100k on the same year over the sam 10 years and goes variable at say 3%

Say jeff and Sam both gets a loan of 100k on the same year over the sam 10 years and goes variable at say 3% (same as joey)

Say billy is the mortgage person in the bank who has put these mortgages through...Times are good benchmarking 10 has just happened in this parrellel analogy and he has got bonuses of say 10% on the value of each loan so say 50k

Now after 2 years the bank have paid the ECB for all 5 mortgages hoping to make as much profit as they can. The **** hits the fan ..ecconomic melt down... the ECB rate has halfed and the bank has decided to double variable rates...John (tracker) rate has decreased. Jimmy (fixed)stays the same and Joey (variable) has doubled.

Jeff and Sam default leaving a mortage of over 60k each. Billy has spent his 50k bonuses.

Surely Joey is subsidisng 4 things here...
the bonuses
the defaults
decisions that the bank has made.
his own decsion not to switch
John(tracker) and Jimmy (fixed) will continue to pay their full amount so subsidising themselves and poor Joey is the one subsidising the 4 areas pointed above..

Now say in 4 years time Peter wants a mortgage and the interest rate have doubled again the ECB is halfed again and he goes through with it...In 2 years time the banks up it the interest again..Surely it is wrong to say that John the tracker is being subsidised by Peter and Joey...Peter and Joey are subsidising the above 4 areas.

Now multiply the 4 areas above I know 2 of them the decisions made by the banks and variable rate mortgage holders have no monetary value..but multiply the other 2 by a gansy load and thats what your guys are subsidising..Not to mention Paul, and the rest of his possie defaulting on motor loans, holiday loans, credit cards, etc...

Madd Finn

MeisterG wrote: »

This subsidy issue is a non-starter. It is part of the mortgage full stop. The only real subsidies ( if they exist at all ) are for bad debts. This jealousy of trackers is complete horsesh*t.

As I believe I am the poster who first mentioned the "S" word let me assure you that I am not jealous of those with tracker mortgages at all. If I were jealous, I would want one, and I don't. I have in the past had a fixed rate mortgage for a few years but am very thankful that I didn't renew that one when the last "Lock-in" period expired.

I am slightly frustrated that the preponderance of tracker mortgages means I am less likely to benefit from the recent ECB rate cut in that my bank won't pass on some of the savings to me because they have to pass on all of the savings to those on trackers.

But that's a double edged sword that cuts both ways. Very plausible scenarios have been suggested (see above) which could result in a very sudden and very precipitous rise in central bank interest rates. In which case, having a tracker will mean there is NO DEFENCE against your bank passing on all the rate hike to you.

Those on variable rates, in this scenario, will at least be in a better situation because banks will probably try NOT to screw them for the full amount in the interest of warding off competition. So they (we) will probably escape the full hike.

And we will probably be as sympathetic to those on trackers then as they are to our plight now.

ei.sdraob

kippy wrote:

Person A : 2006

House Bought for 400,000.
Mortgage : 368,000 (92%) over 30 years.

Tracker Mortgage at 2.25% give or take.

Person B : 2006

Monthly Rent for 15 years :
Monthly Savings for 15 years :
then buy same home today for 200,000 with an interest rate of 5% for 10 years.

Need one important bit of information

What is the average salary for Person A and B (assuming same income so to compare like for like)

and I'll do some math then, lets say 36K average industrial wage?

Welease

fliball123 wrote: »

so let me see if I can break this down..

I am paying my mortgage which the bank paid for in full(very important to take note of that)..Now that the banks are lending to other people who are borrowing at a higher interest rate and because I am on a tracker paying a lower rate of interest my mortgage is being subsidised?? am I picking you up correctly here??? Your also after contradicting yourself there..If they paid off my mortgage years ago how is there a current cost for my mortgage??? Answer is there is none. Your talking about the current cost of lending ... completely different there my friend

I think what you have just proven is that if the bank has paid off my loan then they are paying no more for my individual loan Correct??? Yet I am still paying this sum of money back with interest...

It is actually more correct to say that the repayments with interest that I am making on my loan is not subsidising or helping out in any other lending the bank is dealing with and not the other way around..

You have just proved my point..

I have no idea what you are on about now.. Your mortgage is not paid off.. If it was how would you still be paying it?... I never said your mortgage was paid off...

Your mortgage is not a one time deal when the bank pays for the house to the previous owner. The cost of your mortgage continues to vary through the life of the mortgage as deposits, assets, loans etc are all moved through the system and the bank maintains its liquidity. That is precisely why you don't get a 25 year mortgage with a set % rate over the term of the loan, you can fix for a period (at a premium to allow for cost increases), variable or tracker which maps to ECB rates..
None of those are static over a 25 year mortgage, becuase the cost of your mortgage is not static over the term.. Therefore when the tracker is currently making a loss, that is becuase the contractual costs to you are not meeting the actual costs to the banks..

bamboozle

Rabidlamb wrote: »

Didn't take that new chap long.
I'm hoping it'll be down to 1% before Christmas.
What chance any of this being passed on to variables :rolleyes: ?

http://www.rte.ie/news/2011/1103/ecb-business.html

after all the distractions to this thread, back to the OP,

so far KBC have passed this onto variable mortgage holders and NIB are adding nearly 1% to their variables.

I'd have thought Elderfield and govt would at least be able to encourage/instruct AIB and BofI to pass on this saving to variable mortgage holders.

fliball123

Welease wrote: »

I have no idea what you are on about now.. Your mortgage is not paid off.. If it was how would you still be paying it?... I never said your mortgage was paid off...

Your mortgage is not a one time deal when the bank pays for the house to the previous owner. The cost of your mortgage continues to vary through the life of the mortgage as deposits, assets, loans etc are all moved through the system and the bank maintains its liquidity. That is precisely why you don't get a 25 year mortgage with a set % rate over the term of the loan, you can fix for a period (at a premium to allow for cost increases), variable or tracker which maps to ECB rates..
None of those are static over a 25 year mortgage, becuase the cost of your mortgage is not static over the term.. Therefore when the tracker is currently making a loss, that is becuase the contractual costs to you are not meeting the actual costs to the banks..

The bank has paid the full amount to the ECB or whoever they get their money from as a poster pointed out..Banks keep the liabilities short ala they pay their money asap so to make as much profit as possible....So in my analogy

I get 100k mortgage..the bank borrows at a lower rate of interest than I am paying to make a profit and pay that loan back asap..So the loan the bank took out is gone off their liability side. They now have an asset of a performing mortgage which will be paid in full...So as I say you are talking about the cost of borrowing..The bank is not borrowing any more for my loan as it is paid off and they are getting the money back with interest...So the interest rates rising for variable mortgages are funding the cost of borrowing and mortgages which the bank have already paid are not part of this cost of borrowing. As I say you and the other variable rate mortgage holders are subsidising for bankers bonuses, mortgage and loan defaults..

Padraig Mor

Bannasidhe wrote: »

Just saw on Vincent Browne - according to tomorrow's Indo National Irish bank have raised interest rates by 1%. So, guess we'll see if Elderfield can actually do anything or indeed Kenny and Noonan.

"The bank's decision puts it in direct opposition to the Financial Regulator, Matthew Elderfield.

Mr Elderfield has confirmed he does not have the power to compel the bank to pass on the ECB rate cut." Read more.

Well, that answers that!

ei.sdraob

Ok lets do it using Kippy's figures


2003-2006
* Person A and Person B both graduate in 2003
* with lets say engineering degree
* and get a stable job (obvously not PS so no promotions, increments etc :P) with a steady pay of 36,000 a year > 28,000 after tax for next 30 years

* both continue to rent for 3 years with a yearly rent spend of 9,000 or 750 a month (a bit on high side but hey lets flow with it)
* both save 11,000 a year for 3 years leaving 8,000 euro a year to spend on bills, cars ,entertainment etc etc

---

3 years since graduation
2006
The paths of Person A and Person B here diverge

* Person A buys a house for 400,000 using up the 33,000 he/she saved and getting a tracker mortgage of 368,000 at 2.25% for 30 years, thats 1,400 a month, 17,000 a year every year for 30 years :eek: this person also continues to put aside 3K a year into savings (for the sake of comparison with Persons B 9K rent + 11K savings == 17K mortgage + 3K savings )

kippy wrote:

House Bought for 400,000.
Mortgage : 368,000 (92%) over 30 years.
Tracker Mortgage at 2.25% give or take.

* Person B continues to rent and save and live as before

---

15 years passes since graduation
2018

* Person B buys a home next door to person B for 200,000
in the 15 years he/she has saved (11K*15)= €165,000
getting a mortgage of 35,000 @ 5% fixed for 5 years thats about 8000 a year in mortgage payments but no longer spending 9000 a year on rent, so savings go up to 12,000 a year from 11,000

---

20 years passes since graduation
2023

* Person B finishes his/her small mortgage and owns the home
has also saved 12K*5=60K in this 5 years
person B now saves 20K a year (hey still living frugally for sake of comparison! )

---

33 years passes since graduation
2036

* Person B has a house and savings of 60K + (20K * 13) = 320K in bank

* Person A finished his 30 year mortgage has a house and savings of 3K * 30 = 90K in bank


Person B is better of in 30 years by 230K...
edit: which coincidentally not too far from the 200K person A lost on value of his/her originally overvalued home

---

notes: these are highly fictitious and frugal people, both of their salaries remain flat for 30 years with after tax pay remaining at 28K for 30 years, no inflation occurs, no meteor strikes, flu outbreaks, global financial criseses, defaults, no lotto wins, no sudden injuries, pregnancies etc etc

Welease

fliball123 wrote: »

The bank has paid the full amount to the ECB or whoever they get their money from as a poster pointed out..Banks keep the liabilities short ala they pay their money asap so to make as much profit as possible....So in my analogy

I get 100k mortgage..the bank borrows at a lower rate of interest than I am paying to make a profit and pay that loan back asap..So the loan the bank took out is gone off their liability side. They now have an asset of a performing mortgage which will be paid in full...So as I say you are talking about the cost of borrowing..The bank is not borrowing any more for my loan as it is paid off and they are getting the money back with interest...So the interest rates rising for variable mortgages are funding the cost of borrowing which mortgages which the bank have already paid are not part of. As I say you and the other variable rate mortgage holders are subsidising for bankers bonuses, mortgage and loan defaults..

Clarification again.. I am a tracker holder, I have stated this several times...

Once again, you seem to believe that your loan is dealt with in isolation.. It isn't, and never had been.. In fact it's probably unlikely that the bank still owns the mortgage, it will have been sold onto the secondary market which will include hedge funds etc. As your loan moves through the system the cost continues to move up and down in relation to market forces, and as the banks/brokers need to continually move funding around they in turn will need to charge various amounts to borrow in order to continue to provide mortgages and service payments.

It is pointless for you to continue to throw out "scenarios" when you make no attempt to provide scenario's that map how the market actually works.
If all you said were true, then it would simply not be possible for banks to be making a loss on trackers.. I have shown you enough links which demonstrate banks are making a considerable loss on trackers at present, which amply demonstrate that your scenarios are untrue.

fliball123

Welease wrote: »

Clarification again.. I am a tracker holder, I have stated this several times...

Once again, you seem to believe that your loan is dealt with in isolation.. It isn't, and never had been.. In fact it's probably unlikely that the bank still owns the mortgage, it will have been sold onto the secondary market which will include hedge funds etc. As your loan moves through the system the cost continues to move up and down in relation to market forces, and as the banks/brokers need to continually move funding around they in turn will need to charge various amounts to borrow in order to continue to provide mortgages and service payments.

It is pointless for you to continue to throw out "scenarios" when you make no attempt to provide scenario's that map how the market actually works.
If all you said were true, then it would simply not be possible for banks to be making a loss on trackers.. I have shown you enough links which demonstrate banks are making a considerable loss on trackers at present, which amply demonstrate that your scenarios are untrue.

Your just after saying it has been sold which means it is no longer a liabitity on the banks balance book and is infact the repayments are an asset. So my loan is out of the system. The only thing in the system are my repayments with interest. As for your point about being pointless..Well it is pointless to approach it as you say in isolation when you refuse to take on board the fact that the subsidisation of defaults on mortages, loans and bonuses are going on and if a loan or mortgage has been sold it is no longer on the banks books..So I guess we will have to aggree to dissagree because as I say I got my loan and as long as its on the asset side of the banks balance sheet then no one else is subsidising it..END OF

SBWife

fliball123 wrote: »

The bank has paid the full amount to the ECB or whoever they get their money

Wrong, the bank pays the mortgage holder the money who then pays this to the vendor

They have borrowed this money from short term sources, it'll be rolled over and essentially re-borrowed every three months or so over the term of the loan. The interest rate it is borrowed at will change depending on market conditions.

I get 100k mortgage..the bank borrows at a lower rate of interest than I am paying to make a profit and pay that loan back asap..So the loan the bank took out is gone off their liability side.

What you are describing is simply replacing a liability with another liability, the replacing of one loan by the bank by another loan.

So as I say you are talking about the cost of borrowing..The bank is not borrowing any more for my loan as it is paid off and they are getting the money back with interest...

Your loan is not paid off until the end of your mortgage it still needs to be funded, they are getting payments on principle and interest BUT the interest is being paid at ECB rate plus X% yet the bank is paying ECB rate plus Y% where x<y. There is an ongoing loss on the mortgage

I'm astounded that anyone would enter into a financial transaction of the magnitude of a mortgage without the most basic understanding of how banks work. No wonder we got into the mess that we did.

Welease

fliball123 wrote: »

Your just after saying it has been sold which means it is no longer a liabitity on the banks balance book and is infact the repayments are an asset. So my loan is out of the system. The only thing in the system are my repayments with interest. As for your point about being pointless..Well it is pointless to approach it as you say in isolation when you refuse to take on board the fact that the subsidisation of defaults on mortages, loans and bonuses are going on and if a loan or mortgage has been sold it is no longer on the banks books..So I guess we will have to aggree to dissagree because as I say I got my loan and as long as its on the asset side of the banks balance sheet then no one else is subsidising it..END OF

You don't seem to be listening, so lets try another approach..If the system works as you say...

How can trackers make a loss?.....

fliball123

SBWife wrote: »

Wrong, the bank pays the mortgage holder the money who then pays this to the vendor

They have borrowed this money from short term sources, it'll be rolled over and essentially re-borrowed every three months or so over the term of the loan. The interest rate it is borrowed at will change depending on market conditions.



What you are describing is simply replacing a liability with another liability, the replacing of one loan by the bank by another loan.



Your loan is not paid off until the end of your mortgage it still needs to be funded, they are getting payments on principle and interest BUT the interest is being paid at ECB rate plus X% yet the bank is paying ECB rate plus Y% where x<y. There is an ongoing loss on the mortgage

I'm astounded that anyone would enter into a financial transaction of the magnitude of a mortgage without the most basic understanding of how banks work. No wonder we got into the mess that we did.

But your neglecting the things that have brought about the equation of yours in bold

BUT the interest is being paid at ECB rate plus X% yet the bank is paying ECB rate plus Y% where x<y. There is an ongoing loss on the mortgage

As I have pointed out its because of defaults and over payments in bonuses , wage spikes etc on going costs of business to the banks..

Its simple book keeping my mortgage for the short term was on the liabilitites side of the banks...which they sold/paid off whatever...and is now an asset as I am paying this sum back with interest..(regardless of what other lending the bank chooses to do going forward) my loan/mortgage is an asset and therefor is not being subsidised by anyone else bar myself...

fliball123

Welease wrote: »

You don't seem to be listening, so lets try another approach..If the system works as you say...

How can trackers make a loss?.....

and as I have counterd if the ECB rate goes above 10% are we still subsidising variable rates?

How can anyone be subsidising an asset in the bank?

You are subsidising the cost of borrowing ... trackers are perceived to be making a loss as the cost of borrowing is well above what the interest rate repayments are for tracker mortgages

SBWife

THERE CONTINUES TO BE A LIABILITY ASSOCIATED WITH THE LOAN ASSET

THE BANK MUST CONTINUE TO BORROW TO FUND THE ASSET

THE COST OF THIS BORROWING HAS INCREASED MORE THAN THE MARGIN ALLOWED IN THE ORIGINAL TRACKER AGREEMENT

THIS LOSS IS SPECIFIC TO THE TRACKER SUBSET OF MORTGAGES AND IS IN ADDITION TO ANY OTHER LOSSES THE BANK IS ACCRUING AS A RESULT OF OPERATIONAL ISSUES.

fliball123

SBWife wrote: »

THERE CONTINUES TO BE A LIABILITY ASSOCIATED WITH THE LOAN ASSET

THE BANK MUST CONTINUE TO BORROW TO FUND THE ASSET

THE COST OF THIS BORROWING HAS INCREASED MORE THAN THE MARGIN ALLOWED IN THE ORIGINAL TRACKER AGREEMENT

THIS LOSS IS SPECIFIC TO THE TRACKER SUBSET OF MORTGAGES AND IS IN ADDITION TO ANY OTHER LOSSES THE BANK IS ACCRUING AS A RESULT OF OPERATIONAL ISSUES.

Sorry it is only a liability if it is in neg equity which my property isnt..so if I defaulted they would easily recoup the value of the loan outstanding..So your big typed words FAIL

As I say as long as your not in neg equity you are on the asset side on the banks books...not liability and i have never heard of anyone having to subsidise an asset

Welease

fliball123 wrote: »

and as I have counterd if the ECB rate goes above 10% are we still subsidising variable rates?

How can anyone be subsidising an asset in the bank?

You are subsidising the cost of borrowing ... trackers are perceived to be making a loss as the cost of borrowing is well above what the interest rate repayments are for tracker mortgages

But what borrowing? You said yours has been paid for...
And no trackers are given out now, so the current variable/fixed rates match the market rates..

Try again..

How are trackers making a loss?

Bullseye1

Isn't the rate at which banks borrow a different rate? Inter banking rates? These are more expensive than Trackers so the banks are taking a hit on these trackers. It's been states a number of times by different economic commentators that trackers were losing the banks money.

fliball123

Welease wrote: »

But what borrowing? You said yours has been paid for...
And no trackers are given out now, so the current variable/fixed rates match the market rates..

Try again..

How are trackers making a loss?

Right I will go through this once again..

I am still paying my mortgage...which is not in neg equity so at present on any balance sheet in the world it is an asset.

On the banks books..they gave me this money for the property. The liability of this money which were on the banks books has either been paid onto the banks lender or sold on. Which means they are no longer on thier books as a liabliity. which means as long as this property stays out of neg equity and I am paying back the loan . The loan stays on the asset side...Now as I say how can you subsidise an asset

As I say it is percieved that the trackers are losing money because the cost of borrowing has risen and the interest being paid back is less than the cost of borrowing that is the only differential.

So for example (I know you dont like scenarios)..but if a bank stopped lending before the clusterfcuk of a banking crisis(so no more cost of borrowing) and all trackers paid back their loans would the bank not make a profit...?

SBWife

Bullseye1 wrote: »

Isn't the rate at which banks borrow a different rate? Inter banking rates? These are more expensive than Trackers so the banks are taking a hit on these trackers. It's been states a number of times by different economic commentators that trackers were losing the banks money.

YES.

SBWife

fliball123 wrote: »

I am still paying my mortgage...which is not in neg equity so at present on any balance sheet in the world it is an asset.

On the banks books..they gave me this money for the property. The liability of this money which were on the banks books has either been paid onto the banks lender or sold on. Which means they are no longer on thier books as a liabliity. which means as long as this property stays out of neg equity and I am paying back the loan . The loan stays on the asset side...Now as I say how can you subsidise an asset

THERE IS BOTH AN ASSET AND A LIABILITY.

NEGATIVE EQUITY MAKES NO DIFFERENCE TO THE VALUE OF EITHER AS THEY APPEAR ON THE BALANCE SHEET.

THE BANK DOES NOT SELL A LIABILITY.

IF THE LOAN IS SECURITISED THE ASSET LEAVES THE BALANCE SHEET OF THE BANK ALONG WITH THE CORRESPONDING LIABILITY.

fliball123

SBWife wrote: »

THERE IS BOTH AN ASSET AND A LIABILITY.

NEGATIVE EQUITY MAKES NO DIFFERENCE TO THE VALUE OF EITHER AS THEY APPEAR ON THE BALANCE SHEET.

THE BANK DOES NOT SELL A LIABILITY.

IF THE LOAN IS SECURITISED THE ASSET LEAVES THE BALANCE SHEET OF THE BANK ALONG WITH THE CORRESPONDING LIABILITY.

read my full post and stop with the big text.

SBWife

fliball123 wrote: »

read my full post and stop with the big text.

Read at least one of my posts and you might even learn something.

Welease

fliball123 wrote: »

Right I will go through this once again..

I am still paying my mortgage...which is not in neg equity so at present on any balance sheet in the world it is an asset.

On the banks books..they gave me this money for the property. The liability of this money which were on the banks books has either been paid onto the banks lender or sold on. Which means they are no longer on thier books as a liabliity. which means as long as this property stays out of neg equity and I am paying back the loan . The loan stays on the asset side...Now as I say how can you subsidise an asset

As I say it is percieved that the trackers are losing money because the cost of borrowing has risen and the interest being paid back is less than the cost of borrowing that is the only differential.

So for example (I know you dont like scenarios)..but if a bank stopped lending before the clusterfcuk of a banking crisis(so no more cost of borrowing) and all trackers paid back their loans would the bank not make a profit...?

So what you are saying is that all the economic commentators, governments and financial educated people are wrong? and in fact trackers are not a loss making position for the banks? It is mere perspective?

Going futher, PTSB were making even more errors by attemping to get rid of trackers at at 10% bonus? because they are in fact making money?

Does that sum up your position?

fliball123 wrote: »

As I say it is percieved that the trackers are losing money because the cost of borrowing has risen and the interest being paid back is less than the cost of borrowing that is the only differential.

But that doesn't work with your scenario...

If the liability has been cleared from the banks books... and the total sum repayed to the original lender, then what does it matter what the current cost of borrowing is? Under your belief it is completely irrelevant.. Any new loans would be taken under new higher interest rates.. therefore the banks would never make a loss on any loans?

Maybe just maybe, as I and many others have stated again and again, your loan is not taken in isolation and the banks continue to borrow short term to fund long term loans? (essentially revolving money through the system). So while you mortgage continues to exist, then the bank have to continue to short term borrow money to fund it (as higher interbank rates than the ECB + bank rate)

fliball123

SBWife wrote: »

Read at least one of my posts and you might even learn something.

I have been reading it...But you blatently refuse to accept that banks only keep liabilities in the short term..meaning as this has pointed out to you that the loan I took out from the bank and however they funded that either by inter bank lending or the ECB is well and truely gone off the liabilities side...Now you quite rightly pointed out that what really happens is this wiggle room and the asset which is the loan I am repaying is leveraged to loan out more (in otherwords ongoing business costs and cost of borrowing) which has risen in the mean time. So as long as the property stays out of neg equity and the loan is been paid off in full at no stage does it come back into the liabilities side in the bank..So once again I will ask the million dollar question...How can you subsidise an asset????

Variable rate mortgage holders are subsidising defaults, ongoing business costs and the futher cost of borrowing

Can any of you show me that an asset can be subsidised?

SBWife

fliball123 wrote: »

I have been reading it...But you blatently refuse to accept that banks only keep liabilities in the short term.

BECAUSE IT'S NOT TRUE.

WHY SHOULD I ACCEPT A STATEMENT THAT IS BLATANTLY INCORRECT?

JUDGING BY YOUR STATEMENTS ON NEGATIVE EQUITY YOU DON'T EVEN UNDERSTAND WHAT A LIABILITY IS.

fliball123

Welease wrote: »

So what you are saying is that all the economic commentators, governments and financial educated people are wrong? and in fact trackers are not a loss making position for the banks? It is mere perspective?

Going futher, PTSB were making even more errors by attemping to get rid of trackers at at 10% bonus? because they are in fact making money?

Does that sum up your position?



But that doesn't work with your scenario...

If the liability has been cleared from the banks books... and the total sum repayed to the original lender, then what does it matter what the current cost of borrowing is? Under your belief it is completely irrelevant.. Any new loans would be taken under new higher interest rates.. therefore the banks would never make a loss on any loans?

Maybe just maybe, as I and many others have stated again and again, your loan is not taken in isolation and the banks continue to borrow short term to fund long term loans? (essentially revolving money through the system). So while you mortgage continues to exist, then the bank have to continue to short term borrow money to fund it (as higher interbank rates than the ECB + bank rate)

I am saying that the ongoing costs and cost of borrowing is so high that getting people to pay back their trackers gives them more liquidity and give them more leverage. Where did I say anything about a bank never making a loss on a loan? As I say people have defaulted or are in mid default..or stopped paying their mortgage..

As for the loss making my point is that if the banks stopped dead lending after giving out the trackers and all the tracker mortgage holders paid off their loans in full with interest yes the bank would make a profit..but they dont do that they leverage this new asset (loan repayments) to get further money and as point out its kinda roled over and loaned out again...but if these loans are peforming and paid back in full then the bank makes a profit..The only time when this doesnt happen is if the loan is not paid or the asset is not worth the amount held on the balance sheet and these two points have happened over the last 4/5 years property is down and lots of neg equity and people are stopping payments to their mortgage..

So my point is you are subsidising defaults, futher costs of borrowing and ongoing banking costs..

No one yet has come back with how you can subsidise an asset...

and I have not even thus far brought up the bank bailout and how that further writes down any liability that the bank has

fliball123

SBWife wrote: »

BECAUSE IT'S NOT TRUE.

WHY SHOULD I ACCEPT A STATEMENT THAT IS BLATANTLY INCORRECT?

JUDGING BY YOUR STATEMENTS ON NEGATIVE EQUITY YOU DON'T EVEN UNDERSTAND WHAT A LIABILITY IS.

Is it not true because you say so?

SBWife

fliball123 wrote: »

Is it not true because you say so?

NO BECAUSE OF HOW BANKS FUNCTION.

fliball123

SBWife wrote: »

NO BECAUSE OF HOW BANKS FUNCTION.

A banks function is to make a profit for its shareholders thats its only function...As I say what about Nama???Why was nama created.."to take liabillities off the banks books" ring a bell anyone..So the loan repayments of a mortgage that is no longer on the banks books..how the fcuk can that be a liability too...

Welease

fliball123 wrote: »

I am saying that the ongoing costs and cost of borrowing is so high that getting people to pay back their trackers gives them more liquidity and give them more leverage. Where did I say anything about a bank never making a loss on a loan? As I say people have defaulted or are in mid default..or stopped paying their mortgage..

So you are saying that the only trackers makign a loss are defaulted trackers? Any data to back that up?
It flies in the fact of ever article or comment produced by the industry in the last 8 months..

fliball123 wrote: »

As for the loss making my point is that if the banks stopped dead lending after giving out the trackers and all the tracker mortgage holders paid off their loans in full with interest yes the bank would make a profit

Correct, but if they could pay it off immediately they probably wouldnt need a mortgage would they...

fliball123 wrote: »

..but they dont do that they leverage this new asset (loan repayments) to get further money and as point out its kinda roled over and loaned out again...

Again correct.. We are getting somewhere now.. This is at a high level how banking works.. and you seem to have moved on from your position that your loan is paid for and dealt with in isolation.

fliball123 wrote: »

but if these loans are peforming and paid back in full then the bank makes a profit..The only time when this doesnt happen is if the loan is not paid or the asset is not worth the amount held on the balance sheet and these two points have happened over the last 4/5 years property is down and lots of neg equity and people are stopping payments to their mortgage..

Wrong... and this is where you continue to be wrong.. as the money has to continually revolve through the system (which as you stated above is how banking works) they are charged different rates of interest.. The current rates far exceed the ECB + bank rates, so while I continue to full pay (indeed overpay my tracker) it costs the banks 5%+ to roll that funding over while they only receive 1.75% from me.. It is a full performing LOSS making mortgage to the banks.

fliball123 wrote: »

So my point is you are subsidising defaults, futher costs of borrowing and ongoing banking costs..

Wrong.. if you can show any evidence that only defaulting trackers are loss making for the banks then I'm sure you will produce it..
And the further costs of borrowing, would be the further costs of borrowing to service YOUR (and others) mortages.

fliball123 wrote: »

and I have not even thus far brought up the bank bailout and how that further writes down any liability that the bank has

Because much like bonus's etc. it's irrelevant to the mechanisms of funding mortgages?

Welease

Actually you know what.. don't bother.. You have no interest in understanding the reality of the situation that every commentation, analyst, banker, journalist, educated person understands with relative ease. No amount of information or discussion is going to change that..

At this stage this is just a waste of time.

fliball123

Welease wrote: »

So you are saying that the only trackers makign a loss are defaulted trackers? Any data to back that up?
It flies in the fact of ever article or comment produced by the industry in the last 8 months..



Correct, but if they could pay it off immediately they probably wouldnt need a mortgage would they...



Again correct.. We are getting somewhere now.. This is at a high level how banking works.. and you seem to have moved on from your position that your loan is paid for and dealt with in isolation.



Wrong... and this is where you continue to be wrong.. as the money has to continually revolve through the system (which as you stated above is how banking works) they are charged different rates of interest.. The current rates far exceed the ECB + bank rates, so while I continue to full pay (indeed overpay my tracker) it costs the banks 5%+ to roll that funding over while they only receive 1.75% from me.. It is a full performing LOSS making mortgage to the banks.



Wrong.. if you can show any evidence that only defaulting trackers are loss making for the banks then I'm sure you will produce it..




Because much like bonus's etc. it's irrelevant to the mechanisms of funding mortgages?

Point 1 No tracker that is paying back their loan is NOT making a loss it is UNDERPERFORMING when compared with the cost of borrowing presently as pointed out if the ECB shoots up to 10% are we still then so called subsidising the variable rate?

As for the 2nd point..You may have misunderstood me...I am saying in a scenario where when all tracker mortages taken in isolation paid back there full loan amount with interest and the banks stopped lending so no rolling over the trackers repayments the bank would make a profit and yes there would be a need for a mortage?

as for the 3rd point a loan is dealt with in Isolation no one else pays my loan..what the bank chooses to do with that money when I am paying back this loan is their business..Its like putting a bet on for 5 Euros winning back 10 quid and then puting that 10 on again and losing it and then trying to say that its the fault of the original 5 Euro bet that you lost your money.

As for point 4 This is where we differ..You think that the tracker mortgage holder should be responsible for the banks gambling and using the money they pay back in good faith for further loans. As in the analogy in 3 if you keep putting your winnings on the law of averages is that your going to lose your money..I think where we differ is that you see loans as a whole I see an individual mortgage where the money with interest is being paid back..Why do people with variable mortgages blame tracker mortgage holder for the gambling of bankers

As for Point 5 have a look at Nama why was is set up..The liability side of most banks have been completely written down or do you deny this.

As for point 6 so bankers bonuses, banking costs have no correlation to what your paying..Then why are banks increasing interest rates even without the ECB going up.

fliball123

Welease wrote: »

Actually you know what.. don't bother.. You have no interest in understanding the reality of the situation that every commentation, analyst, banker, journalist, educated person understands with relative ease. No amount of information or discussion is going to change that..

At this stage this is just a waste of time.

Go on take your ball and go home then..

No commentator , Analyst , banker, Jounalist or any other person is paying back my loan..I will pay back the full amount with interest..This is a point of view thing...My point of view is how can anyone else be subsidising my mortgage when I am paying back in full with interest..You can go on about the internal workings of banking practises all you want...But you are putting the blame squarely at the wong people..Is it my fault the banks choose to take the money I pay back and pay it out in further loans??No as I say people on variable rates are paying back Bankers gambling, bonuses, cost of business and the increasing cost of borrowing not to mentions defaults...Take your pick out of that list they should be where your anger is directed not at me

And if you want to continue the discussion at an adult level answer 3 things

1: Nama - why was it created
2: Can you prove that an Asset can be subsidised - by its very nature it cant be...prove me wrong.
3: Are tracker mortgages still subsidising variable rate mortgage holders if the ECB shoots up to 10%

Answer those 3 questions and I will bow to your superior knowledge?

Bannasidhe

Variable rate mortgage holders Vs Tracker mortgage holders.

Private sector workers Vs Public sector workers.

All tearing strips off each other.

Seanie Fitz, Fingers and Biffo must be loving this. Not only does Divide and Rule work - but Divide and Slink away to enjoy big fat pension while everyone is distracted knocking lumps out of each other works too!

Bertie waved shiny things at us to get our attention. It worked.

Now the powers that be shout -'look, that other guy (on the dole/ in the PS/with a Tracker) is getting a better deal then you!!' It's working.

Mature nation my hole :mad:.

ei.sdraob

ei.sdraob wrote: »

Ok lets do it using Kippy's figures


2003-2006
* Person A and Person B both graduate in 2003
* with lets say engineering degree
* and get a stable job (obvously not PS so no promotions, increments etc :P) with a steady pay of 36,000 a year > 28,000 after tax for next 30 years

* both continue to rent for 3 years with a yearly rent spend of 9,000 or 750 a month (a bit on high side but hey lets flow with it)
* both save 11,000 a year for 3 years leaving 8,000 euro a year to spend on bills, cars ,entertainment etc etc

---

3 years since graduation
2006
The paths of Person A and Person B here diverge

* Person A buys a house for 400,000 using up the 33,000 he/she saved and getting a tracker mortgage of 368,000 at 2.25% for 30 years, thats 1,400 a month, 17,000 a year every year for 30 years :eek: this person also continues to put aside 3K a year into savings (for the sake of comparison with Persons B 9K rent + 11K savings == 17K mortgage + 3K savings )...........................

Mortgage of €368,000 on a gross salary of €36,000 :eek:

average_runner

RoverJames wrote: »

Mortgage of €368,000 on a gross salary of €36,000 :eek:

If someone took out a mortage that high on that level of salary, they were asking for trouble and deserve no help as they knew it was unmaintainable!!

ei.sdraob

RoverJames wrote: »

Mortgage of €368,000 on a gross salary of €36,000 :eek:

I know i know if 10x earnings didnt send any alarm bells ringing with the borrower or bank...
stranger things did happen around then unfortunately
like people taking out 30-35 year loans and now will have to be repaying way into their 70s? like that guy on recently on Frontline

Could adjust the salary of A and B to lets say 50K to give more disposable income, but the end result would be the same provided the savings rate, rental and mortgage rates remain the same



as per disclaimer in post inflation is not accounted for (would hurt saver and go in favour of indebted one), neither is any interest on earnings, tax rates remain same and so on, since these variables would affect both more or less the same in long term could exclude em

bbsrs

Head The Wall wrote: »

I'll have no problem spending it, I'll be very happy with the value I will get for it. You seem to be implying I would have been happier spending even more for the same thing a few years ago, I don't think so

implied nothing , I meant what I said genuinely.