Lenders like a pub landlord exploiting a drunk
Published 02/07/2015 | 02:30
Banks don't do Carlsberg. If they did, they would be charging three different prices for a pint of lager.
There would be the tracker pint charge of €1.
Then there would be the brand new customer charge of €3, for those who are being encouraged into the bar for the first time.
But those who have been swigging away for a few hours in the pub would find that they were being charged up to €6 for a pint.
Luckily for drinkers, lenders do not do beer.
But, as we know to our cost, they don't do fair either when it comes to mortgage customers.
What they do is act like an unscrupulous publican exploiting a drunk customer by overcharging them.
Most banks have failed to reduce their variable rates.
The six main lenders will argue that in the meetings they had with Finance Minister Michael Noonan it was agreed that they could cut variable rates, or offer existing customers lower fixed rates.
Most have offered something to existing customers, such as better fixed rates or letting them avail of Loan-To-Value (LTV) rates which are better value.
However, so complicated has it become you might think you are drunk trying to work out who is offering what rate now to existing customers.
The latest attempt to confuse the punter is the LTV rate. This is a mortgage interest rate based on the amount you have yet to repay on the mortgage relative to the value of the property. The lower the amount left to pay on the mortgage, compared with the property's value, the lower the rate you get.
These LTV rates and the other tweaks will only benefit those who have built up equity in their homes. If you are in negative equity there is little on offer for you.
That is why the demand from the start was for a straight cut to variable rates.
But some banks, such as KBC, are still giving better value to brand new customers.
What Mr Noonan has been offered by the banks is little more than tinkering. The banks have called his bluff.
He now needs to carry out his threat to give powers to the Central Bank to cap rates.
At the very least, such powers should mean that banks are stopped by the Central Bank from charging different rates to new and existing variable-rate customers.
Banks don't do morals, and they put their own interests before those of their customers, so legislation is the only solution to bring them to heel.
Otherwise, the nation's hangover from the collapse of the banking sector, and its rescue by taxpayers, will never end.