May 6, 2013

The tracker tale's sorry ending

Posted in Banks · 127 comments ·
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Do you remember the ad in which a bloke on the top floor of a Dublin bus stands up and admits to all the passengers: “I don’t know what a tracker mortgage is”? He stands up, unsure of himself, and makes his public confession, half-petrified. You can see the relief on his face as he admits that he hasn’t a “rasher’s”.

The magic of the ad is that it captured the confused thoughts of the average punter on the bus going to work in an era when everyone was using financial jargon, pretending they knew what it meant, but was scared stiff to confess that they had no idea what they were talking about. No one wanted to admit that they weren’t up to date with the new lexicon at a time when they were being bamboozled by incessant financial propaganda.

Once one guy stands up, he gives permission to others on the bus to admit that they are equally confused. This became a cult ad, with people all over Ireland standing up randomly on buses, confessing that they had no notion what was going on around them financially.

By locating the ad on the top floor of a bus, it reinforced the notion of ordinary people making extraordinarily important financial decisions without full knowledge. People were borrowing multiples of their incomes to buy houses because they were constantly warned about being left behind. And right in the middle of this madness was the tracker mortgage, which was marketed as the solution to the lack of affordability because the interest rate on a tracker was among the lowest possible. It tracked the European Central Bank rate, with a tiny margin of 1 per cent.

(Most people forget that the purpose of the ad was to reassure us that while we might have been perplexed, the Financial Regulator was in control, so we need not worry!)

The tracker mortgage spread like a virus through the homes of Ireland from 2001 to 2007.

When the tracker virus crossed into the general population, it multiplied extraordinarily swiftly. Today, the figures are startling and reveal the extent of this financial pandemic and how it infected the population.

Today, trackers account for 60 per cent of Permanent TSB’s €26 billion Irish residential mortgages. Trackers make up 54 per cent of AIB’s €27 billion book and 23 per cent of the €16 billion book at its subsidiary, EBS. Some 62 per cent of Bank of Ireland’s €28 billion book are trackers.

All told, that works out at €51 billion, or about 52 per cent of residential mortgages at the four main banks. A higher proportion of buy-to-let mortgages, about 70 per cent, are on tracker rates.

About 85 per cent of trackers were lent between 2004 and 2008 when they financed most of the new estates built in our suburbs.

The trackers were injecting 51 thousand million euro of new credit into the market. This prompted builders to keep building and, as the trackers grew and grew, so did house building.

They moved in tandem, the tracker and the hysterical end of the property splurge.

In my latest book, The Good Room, I term the part of the country financed by cheap mortgages “Trackerville” and, like another of my terms with which you might be familiar, “ghost estates”, Trackerville will be the scene of much financial hardship in the years ahead.

The number of people affected is staggering. The tracker went from 0 per cent of all Irish mortgages in 2001, to 15 per cent in 2004 to more than 50 per cent of all mortgages by 2008.

The banks knew they would lose money on trackers, but were confident that, once they had you on a tracker, they could make money in Trackerville by lending more money to you for car loans, kitchen extensions or holiday finance on top of your overdraft and credit card.

But now that has all gone pear-shaped. The banks are de-leveraging. This means they have to take in more deposits than they are lending out and, crucially, they have to make a big margin between deposits and loans.

This means that, even if their loan book had a normal structure, banks in Ireland would have to minimise deposit interest and maximise loan interest. This implies a huge credit crunch.

Now consider the credit crunch when 50 per cent of the banks’ mortgage books are trackers.

In “normal” de-leveraging conditions, the credit crunch is bad, but when there are trackers involved, it implies that the banks have to charge even more interest on the loans that they make.

On the other hand, they have to try to pay as little interest as possible on deposits while at the same time attracting deposits. The reason they need deposits is because they have to get their loan-to-deposit ratio, which went ballistic in the boom, back to prudent levels. The trackers serve to penalise those people who don’t have trackers, which is why we are seeing variable rates rising all the time, even as the base eurozone interest rate is cut.

In addition, the trackers imply that the rate of interest charged on new business loans, for example, will be higher than might otherwise be the case. This implies that the credit crunch which small businesses are suffering can’t ease as long as the trackers continue.

But, of course, if you have a tracker, you are hardly going to worry about these concerns. For hundreds of thousands of mortgage holders, the cheap tracker rate of interest (which fell last week) is the only thing between them and default and eviction.

Therefore what we are seeing is a type of financial apartheid in Ireland. Those on trackers have special treatment – they are the white South Africans of the credit world. Those who are on variable rates or are looking for credit to keep their businesses going are the black population, discriminated against in banking and credit.

Ultimately, the domestic economy can’t recover under the credit apartheid regime because, for the economy to grow, credit has to be reasonably priced.

In the longer term, the trackers pose a twin dilemma for Ireland. In the short term, recovery is strangled by the effect of tracker mortgages on bank lending and banking behaviour. In the longer term, like the apartheid regime, the day of reckoning for trackers will come.

If the European economy ever recovers, the Germans will insist on interest rates moving up swiftly to pay its savers, who are seeing their income from saving wiped out as interest rates keep falling.

What happens to the ability of hundreds of thousands of Irish people with trackers to meet their mortgage payments when interest rates rise to their long-run average of 4 to 6 per cent?

Clearly we will see mass defaults across Trackerville and these defaults will be unique to Ireland because they will be happening when the rest of the eurozone is recovering strongly.

If anything shows you just how damaging the banking policies of 2000-2007 actually are, it will be the sorry story of the tracker mortgages for the course of their 20 to 25-year life.

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  1. If the black propaganda we’re getting used to extends to trackers, people will be afraid to admit to having one because they’ll be seen to be subsidised by those with “proper” loans. A kind of welfare state mortgage.

  2. michaelcoughlan

    Subscribe! Woo whoo!

    • michaelcoughlan

      Thought I was in first. Shite.

      • michaelcoughlan

        Hi Bonbon,

        Before you bore me to death I think the reinstatement of glass Steegal is a good idea. Let us know how your efforts to bring about same are progressing.

        • Deco

          All Bonbon does is come to this site and mention it as often as possible. He is not changing anything. He is not lobbying his local TD. He is not writing to newspapers. He is not starting a campaign on the matter. He is not exposing frauds like Slick Willy, instrumental in removing Glass Steagal. He is playing safe, and annoying everybody on this site.

          • Adam Byrne

            I’m starting to think it’s a deliberate tactic to alienate people from the site – trolling or whatever you call it.

          • Well now Adam , was not that my original comment.
            BB never debates the current issue and never answers a question.
            He castigates all mistakes and excesses of economists past , all that is, except his mentor LaRouche

          • bonbon

            Monetarism is the reason “trackers” gripped the minds of those bus passengers. They claimed complete ignorance, but held on to the the deep belief in magical properties of monetary tokens which made them easy prey. Tracker magic!

            That deep-seated wild-eyed belief is now exposed. That’s the really important first step to health. The grip of monetarism on the Troika is causing an epic disaster, the same mental disease that gripped (groped?) Tigers. A pandemic.

            The Triple Curve Typical Collapse Function exposes (pardon the expression) the damage this mental illness has done. Yet there is a cure – the spluttering noticed here is of (grown?) kids refusing their medicine!

            Instead of splitting society as DMcW “observes”, and splitting credit from the physical economy, as the Triple Curve precisely captures, let’s split the banks! This is not fancy technical mumbo-jumbo jargon – it is only 33 pages of precise legislation, with a Preamble To provide for the safe and more effective use of the assets of banks, to regulate interbank control, to prevent the undue diversion of funds into speculative purposes, and for other purposes.

            Let the doomed “investment banking” just try to claim it is the victim of apartheid!

            There is a big difference in “observing” trends as the British liberalists like to call their actual savage looting, and deciding to change it!

          • michaelcoughlan

            I love when you post irrespective of whatever agenda you have because it gives me and everyone else the opportunity to show you up forth nut job you really are for example;

            “Monetarism is the reason “trackers” gripped the minds of those bus passengers”

            The clip is a video advertisement with actors playing their part. What’s going through their mind is their lines and making sure they don’t miss their cues.

            I for one hope you keep up your tirade so hopefully sooner or later McWilliams gets the courage to ban you from the blog.

  3. michaelcoughlan

    Hi David,

    I liked the article. Maybe it might be a good idea to suggest to the owners of trackers to aggressively pay down their mortgages to percent the calamity when the germans hike the rate.

    I think the Germans will be out of the euro by then,

    Regards,

    Michael.

    • Michael,
      This is the same type of loan that many people in the USA took out during the same period. Ours were 3,5,7, and 10 year fixed that converted to adjustable loans. While ours don’t drop to only 1% over bank cost, they did drop to the low 3′s and 4%’s. With the Dodd/Frank rules in place most of these people cannot get out of the loan that they are in. By making everyone qualify for their home loan, no one can refinance,sell, or move to another property. At the moment they are feeling safe and secure with a false low interest rate. Once rates move to a normal range there will be huge defaults and foreclosures here in the USA. I guess it is somewhat comforting to know another country will be in the same boat.

    • bonbon

      Out of the Euro and into National Monetarism, if you have followed my post on the AfD.

      National monetarism is an even worse stage of the monetarist disease, likely the final stage. Wild-eyed gesticulations, incredible jargon, and savage murder of former nations, reducing them to concentration camps. And the inmates roll dice, even have fake money.

    • rincewind

      One should pay down the mortgage as slowly as possible. You will never get another loan at that rate.
      Use excess money to put into deposit schemes or term deposits, which pay more interest than the tracker rate is. Make sure the deposits are spread far and wide so a confiscation like in Cyprus will not come into play.
      If or when the interest rates go up, just use the money to pay the mortgage down at that point. But this will not happen anytime soon.

      • michaelcoughlan

        In “normal” circumstances a good idea. However if hyperinflation arrives and interest rates go through the roof what then?

        • rincewind

          If hyperinflation arrives, you can pay off the mortgage with a few paychecks (assuming you get increases somewhat inline with inflation…)
          If, however, as David suggests, inflation in Germany picks up and interest rates go up like say in the eighties, you still have the money from the deposits to pay down the mortgage – nothing lost. However, you would have the gain of the interest spread.

          • Bamboo

            That makes sense.

            However, my motto is to pay off as fast as you can. The earlier in life you get it off your back the better. Save first and buy when you can. Often the reason you need a loan is because you are running out of patience. You want it there and then. That is where the banks and the media come in play with your impatience.

            A young couple, with no kids and a double slightly higher than a standard income can easily save up the price of a house in about 4 to 5 years. The higher your demands the longer you have to wait. If you can fence off other wants, social pressure like an expensive wedding, foreign holidays and all other impulsive expenses then you can make it.

            Most importantly is to fence off the media who are carriers of social pressure diseases. Once that is done you are free for the rest of your life.

  4. wondergirl

    David, why are the prudent always being targeted for blame. The ‘trackers’ were available to everyone, and anyone with economics in mind figured out that the ‘tracker’ was the best option. It’s hardly fair to persecute the people who took these up. And now they are being pitted against the ‘variable’ mtg holders, just like the private sector is being ruthlessly pitted against the public sector, the majority of whom are regular Joe Soaps on regular wages.
    I wager you would find, that the people who took up the ‘trackers’, did so for only one property, and did not gamble with someone elses money. I can’t understand how people expect to be able to gamble and then when it doesn’t work out, they should be forgiven their wager. It wouldn’t work in Vegas!!

    • StephenKenny

      Because only the prudent have enough money to make it worthwhile.

      • wondergirl

        Rubbish Stephen, we took out our mortgage in 2004 and took the minimum, even though the bank wanted to give us way more. We could see the benefit of the Tracker. We only have one property, and we live in it. We haven’t had the extravagant life style like more, and I can’t see for the life of me, why we should be persecuted now for being prudent. By the way we’re in our early 40′s, and we could have gotten carried away like all our peers at the time, but we figure you shouldn’t borrow what you potentially can’t repay. There are many people out there, our peers included, who are sorry they jumped on the bandwagon at the time!

        • Bamboo

          Wondergirl,

          you are reading too much between the lines. I can’t see where in David’s article there will be prosecution of the tracker mortgage holders. The banking policies that were introduced in the tracker mortgage era is a unique trick by the bankers and our approved by the FF gov to lure people into getting out a mortgage. Ireland and its tracker mortgage policy is so unique that the rest of Europe is not going to accept easily.

          Ireland will be completely alone in this dilemma and Ireland won’t be able to get any backing from other EU member states.

          • The language in the lead article is divisive, setting one sector against another.
            Good for selling newspaper print but resolving nothing. Yellow journalism.

    • bonbon

      Have you not noticed Obama’s bail-out? He “rescued” Wall Street, even mor generously than Bush!

      What do you think the EU “bail-out” is about – it’s exactly the same. Draghi and Bernanke in a horrible walse!

      And in Vegas the house always wins.

    • Reality Check

      Let me Guess; You work for the public sector.

  5. Deco

    We need a sketch from the top of a bus “I don’t know what my PAYE, PRSI, USC, VAT, etc.. is for….” in respect of the way the state has become a debt collection racket for the bankers pulling the policy strings in Brussels.

  6. Deco

    Of course in retrospect, the banks had no clue what a tracker mortgage was either – in terms of it’s consequences.

    And yet they pretended to be the experts.

    It looks like “our” crooked banks will be looking for more money.

    • Bamboo

      Fully agree with that.
      However, you are talking in the past tense. “had no clue” and “pretended”.

      By default banks are after your money at all cost and have no clue what the consequences are for your family, your business and society in general. This is in the past and will be for the foreseeable future.

      The sad thing is that people were let to believe that we have government that is policing all these scams. This policing is in governor, financial ombudsman, judicial system, you name it format.

    • bonbon

      And you are pretending they are innocent? They need a stringer, but it will not work.

      You repeatedly intervene to protect the banks. Why?

      I intervene to split them, not just irritate them.

      Glass-Steagall is only upsetting to stringers.

      • michaelcoughlan

        “I intervene to split them”

        No you don’t. Your too busy talking yourself up your own hole on McWilliams blog.

        • bonbon

          Then spread the word, intervene! Split the banks, now!

          Dillydally not! Our very existence depends on it!

          • michaelcoughlan

            My existence dosent depend on it. I am self sufficient in food, shelter, water, heating, and some few bob held in bullion coins. It makes no difference to me whether glass stegal gets reinstated or not.

  7. Deco

    Of course, if the banks cannot get the loans to deposit ratios fixed, they will not be allowed issue new loans thanks to regulations like Basel. And the ECB are actively discouraging saving by means of their interest rate policy, resulting in malinvestment in the stock market and other sectors instead. Meanwhile consumers save more because they cannot be certain of having sufficient money for the rainy day in a low interest rate environment. And the government taxes whatever the interest return is, with DIRT tax.

    The banks are unable to prop up the real estate market. The Irish real estate gombeen sector’s best hope is to look for suckers from abroad to “invest” in Irish real estate, at a time when the state is introducing taxes to make real estate into a liability.

    The Ponzi scheme of ECB financing made matters much worse on the way up, and is now making matters much worse on the way down.

    The Euro experiment is failing. One country after another is being driven into policy madness, for the sake of a centralized policy making mechanism. And from policy madness, comes misallocation of capital and labour. And from this comes sever contraction, debt, and absurd labour markets. Record unemployment and skills shortages.

    • Deco

      We have a consensus from Brussels down as regards the policy framework that is to be followed. We have happiness for those that believe in one answer to everything. And a magnet for such fools to follow.

      And obeying that policy framework is causing misery.

      • bonbon

        The only alternative to that murderous “framework” is to split the banks, assert national sovereignty over them.

        “Observing” misery, is really propagating it. Drop the “endearing” British liberal pessimism, take a lesson from FDR!

        Quit propagating “observations”!

  8. BamBon

    DmW you’re just demonstrating the irrationality of the present monetary system not how to fix it.

    The USA supported the white banking system in South Africa while most of the world was not but yet no one boycotted the USA and no one boycotts them now while they (Obama) bomb children with their drones and melt the skin of babies.

    It’s nice to see the not so rich get some solace – ‘those on the buses’.

    Demonstrating the senselessness is worthwhile but a suggested of fix may be a more positive way forward, so what do we do? Change the system! Or just whine

    • bonbon

      And how would you propose to fix it?

      My point of view is well known here.

      • michaelcoughlan

        The market will fix it. If you weren’t so busy talking yourself up your own hole you would know that ordinary people all over the world are stocking up on bullion coins including central banks!

        • moneydoesnotmatter

          What is so wrong with Bonbons analysis Michael?.
          You are beginning to be tiresome with your foul mouth.
          Aslo you are sounding just like another gold bug.

          • Gold is the ultimate money whether we like it or not. Disparagement of those favouring gold as money is as an empty kettle making a lot of unnecessary noise.

            Read the Daily Bell interview of Antel Fakete posted already.

          • michaelcoughlan

            Nothing wrong with bonbons analysis. It’s very accurate I would say.

            Its just Bonbon keeps hijacking every conversation back to glass Steegal.

            I’m just giving Bonbon a dose of his own medicine. I won’t do it any longer though. You are correct. I have overdone the foul mouth stuff.

            Thanks and regards,

            Michael.

        • bonbon

          Your wild-eyed belief in “the markets” is a mental disease, fully curable though. The medicine is to think the Triple Curve and FDR’s action through. If rage occurs, ask why. There is not doubt plenty of good reasons for rage.

          Glass-Steagall hits the incredible fantasy of “the markets” square on the jaw. Give the markets a black eye!

          Remember Odysseus faced with the monster Polyphem (eats all). Blinding his one eye opened the door!

          • michaelcoughlan

            You simply don’t get the point I am making. You don’t have to keep telling me over and over again Glass Steegal is the right thing to do. I accept the point you make.

            You keep cajoling people to intervene and fight them but offer no direction in that regard or leadership.

            Your refhoric is about as useless as if you found yourself in a room with Hitler telling him over and over again that he should rescind the laws persecuting the Jews. He like bernanke, cheauchescu, regan, maggie etc are idelagoues who Wong stop until everything collapses on top of them. The energy I have is better served looking after myself and helping pople who want to be helped instead of following nonsensical blatherings of complete nutcases like you!

            Your sincerely,

            Michael.

            Keep it up and you will be thrown off the blog.

      • BamBon

        Glass–Steagall would be a good start but it’s not enough for me the dependency on markets means we loose control of our sovereignty and we have become dependent on the whims of others, the self interest, the me.

        I read a lot of your posts and I will say this; you are one of the few people here who is not here for your personal gain, your opinions are intended serve all and not a few. The buddies on here do not have any opinions other than to hang on to the word of DmW As if he will be leading the change but some people need a hero. DmW is in the business of making a living he is no political activist in search of a change.

        • bonbon

          Glass-Steagall is merely, but essential, door-opener to Hamiltonian Banking, as expressed by Lincoln and FDR. We need a full transatlantic expression now. This kind of banking was well known to Arthur Griffith, no surprise as Mathew and Henry Carey were active publishers. Largely written off by the British Empire today, crumbling before our eyes, it is the way to go now.

          DMcW is on the crest of the wave and I am sure he knows what that means. What is happening now is far more crucial than the previous critique of the housing bubble, good as that was. It is now time for creative action.

  9. The apartheid analogy is flawed as the ruling clique in South Africa had explicit political power to enforce their regime’s demands. No-one forced people to take out tracker mortgages, although the absence of a quality rental market in property may have forced some to drink the Keltic Kool-Aid:

    “The job of the Federal Reserve, he famously said, is “to take away the punch bowl just as the party gets going,”–that is, raise interest rates just when economy reaches peak activity after a recession.”

    Note well, these words of Wiliam McChesney Martin and return to them when the ECB gets mediaeval on Ireland’s ass in years to come. When Germany achieves it’s goals, the low-interest punch-bowl will be taken away and the reality of the situation will emerge in chaotic default scenarios ‘going forward. Then the real work begins:

    http://www.2nd-republic.ie/site/frequently-asked-questions

    Troika Banks thought their ‘black propaganda’ would be a good ‘loss leader’ for other sales, like supermarket wine deals. Now it’s gone wrong the blame game begins, but not for those who were involved in ‘originate to distribute’ fun and games whereby the only thing that mattered was hitting bank monthly sales targets for debt (disguised as ‘credit’). Spot on Furrylugs!

    In a genuinely capitalist framework, the European economy would ‘recover’ once the full extent of the property debacle in Ireland, Spain and elsewhere was recognised and allowed to clear itself through major price drops, thereby allowing the next generation the chance of a home without becoming a debt peaon to stabilise the delusions of their parent’s Boomer Cult. That can’t / won’t happen as it would trigger another banking collapse, hence the stasis continues, with the fiction that somehow wages can fall whilst taxes rise, yet Boom era Boomer mortgages can be serviced in a reflationary interest cycle once ‘animal spirits’ return.

    In the UK, the clueless Coalition nakedly engineer a boom by prioritising lending to mortgages so as to create a mini-boom before a General Election. Call this anything you want but it isn’t ‘capitalism’, it’s Corporate Cronyism. And like Tokyo in 1989, it will end in tears.
    It doesn’t matter if people were foolish or greedy. If they broke no laws then it’s a matter of Contract Law. I’m sure the banks involved would love to retrospectively change the contract and have no doubt their sales teams do all they can now to ‘convert’ trackers to variables.

    Those with tracker mortgages are presumably either paying down the capital or saving a float for higher rates. No one takes out a mortage over decades without some sense that there will be ups and downs. Of course, rising interests rates to quell a German property bubble will destroy the Irish Middle Class. I’m sure Angela Merkel lies awake at night worrying about such a scenario.
    The Troika-USuk-Satrapy only needs a functioning hard-money Trojan Horse enclave based around the IFSC: the rest of ye can go to hell in a hand-basket or make the ‘unpatriotic’ decision to emigrate, go bankrupt, and start again as a free human being in the Fifth Province, awaiting r[evolution] in the original Four provinces, like most genuine rebels in Irish history.

    Ireland is in a worse state now than ever before. The First Irish Republic has collapsed, it’s ethical foundations subsiding into the morass of treason. Roman Clerics. French, German and USuk American-British bankers: Ireland has been totaly stitched up from the outset. It’s inept ruling elite never even realised it was being set up as a patsy in the Euro Geo-Political currency poker game by America, Britain and it’s new ‘friend’ Europa. Now the ‘common people’ will pay a terrible price. I wonder what W.T Cosgrave would make of it all?

    The hard work of validating and honouring the original brave vision whilst clearly and calmly documenting the current debacle of the First Irish Republic continues…that’s easier to do when, like Patrick Pearse’s father, you are the ‘outsider’s outsider’ from Birmingham, and watch events unfold without being embroiled in the raw emotion. I’ve enjoyed solving my ‘existential riddle’ of being “born on a boat on the Irish Sea between Hollyhead and Dun Laoighaire” and i am optimistic that those ‘fugee Paddies who warned me never to move to Ireland may live to see a real true free Sovereign Nation rise from the ashes, with a phoenix in Phoenix Park, etc. It’s time to put the ship of state in order, to put “fionn uisce” [meaning "clear water]between the foundational dreams and the current reality. “We are where we are” say Ireland Inc. Not for much longer…

    regards

    ‘mad Paddy from Brum’. etc.

    http://en.wikipedia.org/wiki/William_McChesney_Martin

    • Adam Byrne

      Great writing Andrew.

    • michaelcoughlan

      “The First Irish Republic has collapsed, it’s ethical foundations subsiding into the morass of treason”

      Never was a truer word spoken. They didn’t even use the word Republic in the founding documents.

      • Adam Byrne

        Absolute disgrace how this country has been run for almost 100 years now (100 years!), and the current shower of inept, incompetent and corrupt gombeens are probably the worst ever.

        I think I will write to Enda Kenny again to tell him so and I encourage eveyone else to do likewise.

        taoiseach@taoiseach.gov.ie

    • Your servant Sir. Kind words indeed.

    • 5Fingers

      Well – that’s game set and match as far as I am concerned. Mind you, I do not believe the original founders of the republic (here and elsewhere) had anything other than their self interest at heart. Foundational dreams were merely a manifesto to keep the majority on-side. And that, friends, is the problem.

      When you say Ireland is in a worse state than ever before – what does that really mean? It’s a damn sight richer materially. Representatively, it could be argued more people are better informed – things were a lot worse in that regard. Not disagreeing, but I do think we meed to articulate in a manner that in clear to the average reasonable man in the street.

  10. Beaver

    A certain Danish bank gave out ECB rate plus 0,5% tracker mortgages in the boom, some of which are interest only with a pay back of capital at the end of thirty years. They are now inviting their beloved customers in for chats about paying off some of the capital early in advance and meeting with polite refusal due to the state of the economy. There is something rotten in the bank from Denmark.

    I thought Draghi offered all EU banks funding at the ECB base rate for at least two years recently . LTRO? This means they shouldnt be losing money on the trackers unless they are silly enough not to apply for funding from the ECB for fear of what the neighbours/rating agencies will think. Please enlighten me.

    • joe sod

      they made a very bad decision buying national irish bank at the height of the boom, national australia bank were the sellers

  11. joe sod

    so bank of ireland still not a buy then, you made a convincing argument not to invest in the banks. So the ECB really holds all the cards and the fate of irish banks still depends on ECB decisions. Will the ECB do like the bank of japan is doing with aggressive monetary easing and money printing to reduce the value of the euro

  12. BamBon

    A gun made with a 3D printer, coming to a village near you

    http://www.bbc.co.uk/news/technology-22423883

  13. http://www.thedailybell.com/29047/Anthony-Wile-Antal-Fekete-Gold-Backwardation-and-the-Collapse-of-the-Tacoma-Bridge

    To get a handle on the economy of the world , this is an enlightening read. Are we in fact in an ongoing deflatioary spiral to the complete debasement of all currencies to and age of barter. From which will spring a new gold standard and a real bills doctrine.

    Antal Fekete…
    “As far as the future is concerned, the importance of real bills must be seen in the light of the inexpedience of barter in a complex economy. People will want to trade; they don’t want to barter. After the demise of the dollar, in the absence of purchasing media people will reinvent real bills payable in gold at maturity. That is the only way to alleviate deflation and mass unemployment worldwide.”

    Antal Fekete: “The price of gold is headed for extinction. I for one don’t believe that the price of gold is headed for five digits. Long before that might happen, permanent backwardation* would shut down the gold futures markets. Gold could no longer be purchased at any price. Gold would only be available through barter. World trade is facing an avalanche-like transformation flattening out monetary economy into barter economy. Practically all economists, financial writers and market analysts have missed this possible scenario. They don’t see the greatest economic contraction ever staring them in the face. They don’t see the coming tsunami of unemployment. Very few see deflation as indicated by the progressive disappearance of cash gold. It never occurred to Bernanke that the new Federal Reserve notes he is printing galore could also go to purchase physical gold, causing the gold basis to shrink. Once the gold basis* goes permanently negative, the total U.S. debt, all $16 trillion of it, will not be worth one ounce of gold. That will pull the rug from underneath the international monetary system. Barter is the ultimate in deflation, and that is what the world economy is getting.”

    http://www.thedailybell.com/29047/Anthony-Wile-Antal-Fekete-Gold-Backwardation-and-the-Collapse-of-the-Tacoma-Bridge

      • bonbon

        Very odd twist on the facts there. The Euro was launched by Maggie and Mitterand – Kohl was forced to agree with it already in 1992.

        Lafontaine’s Die Linke might like something for their campaigns.

        In fact Lafontaine’s teacher was Mundell, a Canadian!, the Euro “father”. Even Mundell’s wiki has to admit it.
        Mundell said recently the Euro is working, its chaos will force a “union”. I think he got that wrong!

        • Gold goes west to east. Mrs Wang afraid of currency collapse. She has that right.
          Reference to obedient Irish peasant who quietly pays 64,000,000,000 to bale out two banks.

          Kaiser Report
          http://www.youtube.com/watch?v=c3pFKicj9MY

        • cooldude

          I disagree with you on this point Bonbon. All Mundell is doing is telling the truth. The Euro was designed with the very clear knowledge that it was unworkable. The economic chaos that this unworkable currency union would deliberately bring was to be used to bring about a political federal union. This was all clearly planned and a full political federal union which will include a European army is the final objective. Existing sovereign governments will be little more than county councils and ALL major decisions will be taken by the unelected beaurocrats with very little input from the elected members. Welcome to the new reality.

          • correct.
            The destruction of the nation state as a deliberate policy toward a one world autoctatic government where the peasants are serfs and the elite reside in luxury

        • bonbon

          Mundell was letting the cat out of the bag alright. The Euro is a tool to remove national sovereignty, targetting Germany from the get-go, and has done that alright. That removed the single one and only method to deal with the banks. Only sovereignty can unleash Glass-Steagall, and Glass-Steagall is a declaration of independence! That is why it is so important.
          Anyway Mundell misjudged, the sentiment is so nasty in Europe now that anyone who tries to go for a U.S.E is welcome to the loathing they richly deserve.
          If they go for a Carl Schmitt Enabling-Powers after some kind of Reichstagsbrandt it will backfire like every thing else these incredible yobs try.
          Mundell is simply an imperialist from Canada.

        • The Euro was launched by Maggie and Mitterand

          Where is the evidence that Maggie Thatcher engineered the Euro.

          The evidence I can find is that she was vehimently against it.

  14. Adelaide

    Alternative to the traditional property ladder.

    Like many in my circle we have been patiently but reluctantly renting on the sidelines of the (hyperbole of ‘ordinary people doing the SENSIBLE thing’ claptrap) boom, biding our time through the inevitable bust, till the day house prices become affordable (national wage x 3). That’s a LONG time renting, but in relation to the inflated property market we ‘ordinary’ people in our circle decided it was the sensible thing to do.

    Well, frankly, we’re losing patience. At this rate of price decline we’ll all be six feet under in the renters graveyard. Now I know there have been, are and will be a myriad of predictions of an imminent price collapse but the art of kicking the can down the road has been perfected so effectively by the authorities that we decided to look at alternatives. (Plus the standard of properties in general are shockingly substandard that they offer zero quality of life)

    So the problem is to square vastly overpriced substandard uninhabitable properties with a habitat worth living in and owning. A colleague by chance came across the concept of self-build houses and by timely coincidence attended a two-day construction course with a proponent of self-build housing, an Irish architect, Peter Gowman. (http://www.livingarchitecturecentre.com) who is presently doing a tour of Ireland. We went along to one of his presentations with a lot of scepticism and came out totally rejuvenated.

    We have since extensively researched this field of low-cost mortgage-free simple-design natural-material low-skill construction. There is a wealth of such websites online (the Eastern European websites are especially eye-openers)and actual self-build houses (straw bale-timber-cob etc) in Ireland to visit in person.

    We have calculated that the simplest basic-plan two-bed spacious bungalow would cost 30k-40k to construct, covering all necessary materials, hiring of temporary specialists and equipment/transport. The trick is that you and your unskilled colleagues do all the grunt work and follow simple tried-and-tested box-shape plan.

    But talk is cheap and so we are going to build a small-scale version of our chosen plan this summer in Kerry and put our calculations to the test.

    Had you told me that ‘ordinary’ people could build their own eco-houses I would have dismissed it as fanciful notions, (too many episodes of BBC’s Grand Designs) but the more we study this and do bite-size experiments of the construction techniques in our (rented) gardens, this notion has gripped our imagination and given us tangible hope.

  15. Bamboo

    Hi Adelaide,

    That is an interesting concept.
    I think, we in Ireland, have this long well covered to prevent people doing things themselves. A bit of land with planning permission is actually quite expensive and/or unaffordable to many young families. There are all sort of rules and regulations to stop people selling and buying land willy nilly. I am not familiar with Kerry but hopefully this is not a problem for you.

    From my own recent experience I know that in my area an architect is required to get the planning permission for a construction that is somewhat unconventional. There are plenty of examples whereby DIY plans and projects are rejected. You could have two joining neighbours going for an extension and the one who employed an architect will get the planning permission and the other DIY person will have to wait a couple of years. I am not sure how much the brown envelope method is used or does it even still exist.

    I have my serious questions of how some plans get planning at all and I can only conclude that sometimes miracles happen or the brown envelope is used. As you know you need to have serious money to put something in that envelope or you need to be a serious established business man/woman with a proven track record in living in the area where you want to build.
    I am not sure what you mean by a basic two-bed room bungalow. Some council put some heavy levies on a build. Again you may not have to pay for these levies. I didn’t have to pay any levies for my extension but other neighbours with similar extensions had to pay a couple of grand. I was lucky – maybe the planner was in good form that day.

    Then you need to have all your services electricity, water, gas, telephone maybe done. Most likely you need to have permission to open up the road for the connection. Is this included in the price you mentioned.
    Most important to know is that building the basic skeleton is the cheapest part of the build. For example: I have the cheapest possible kitchen from IKEA and bought the electrical appliances and worktop somewhere else as I was looking for slightly better quality. I installed it all myself. That was 7k. There is only one IKEA in Ireland and to transport a kitchen from Dublin I reckon that will quite expensive as well. I choose IKEA simply it was the best value.

    I can go on and on, from internal doors of at least 100 euro a piece without hinges, to flooring, central heating system or wood stove and triple glazing windows. BTW: go for triple glazing instead of double glazing as this will only a little extra. Don’t mind the sales people.

    There is an excellent 3D application for all this work http://www.sketchup.com. It is very easy to use and there are plenty of tutorials available online. I am sure you only need a couple of hours to learn this application.

    I hope I am not spoiling your enthusiasm but I think I should inform you as best as I can to make sure you don’t get stung. BTW: there are plenty of British TV shows telling you how much things cost and how easy it is to get all of that done. Be aware that you should take these shows with a truck load of salt. But you know this anyway.

    • molly

      It’s hard to get planning permission to build a one of house you have to born in that location but you can by a seckond hand house.
      This does not make a lot of sence the local needs applys if there is planning in that area it should be giving to any Irish citizen .
      The local needs is a discrimination and should be scraped.

    • Deco

      There is a crowd called “Cash’n'carry” Kitchens and they are cheaper than IKEA.

      There are also smaller operators, and you can price these as well.

      Remember you are supporting local jobs, and I would say there is little difference in the price.

      The best value book that you could ever buy is a comprehensive DIY book. Good and thick. You will also find loads of tips on Youtube. Stuff like how to replace parts in your washing machine, how to fix all sorts of stuff etc…

      • Bamboo

        Absolutely Deco. Most likely you have to pay a deposit. Beware that local businesses can be gone by tomorrow.

        • molly

          Never pay for a job untill it’s completely finished no matter what you are told .
          The person who’s doing the job will always finish the once he is owed money .

    • Adelaide

      Hi Bamboo

      I also share your reservations. The one sliver lining on the ‘planning permission shenanigans’ cloud is that in Ireland there is an ‘exemption’ for detached structures limited to max 25ms area by 4m height.

      These specs do not require planning permission, I’ve visited two such structures recently and we were surprised by how substantial and spacious they were. The experiment in Kerry will be limited to these specs and so we require no planning permission as it is not a permanent domicile.

      That said there are single men who permanently live in such ‘exemption’ structures (built by themselves and financed by their meagre redundancy – unemployed but mortgage free, we’re talking survival not dream house but compost toilet, kerosene powered etc I suppose the American term ‘living of the grid’ would apply) and in a seemingly legal limbo a council can only confirm that an abode is a permanent domicile if the occupant confirms it.

      The obstacles you outlined to low-cost self-build properties is one I believe of ideology, ‘mortgage-free’ domiciles is a radical attack on the status quo Ponzi debt-economy Frankenstein. The monster will undermine any affront to its Wizard of Oz façade.

      • Bamboo

        Wishing you all the very best with your plans. It sounds great. Hope to hear from you how you get on with this.

      • Adelaide

        ps the experiment is we are building a timber frame straw bale ‘mini’ house with internal wiring etc to duplicate a functioning house as much as possible. I will post a link to photos of its structure end of summer if you are interested.

        • Bamboo

          Please do. I’ve put a lot of research in it myself but after a life-time of house improvements I’ve finally come to a stage that I am content with what I have.

          I am interested in how young families or multiple generations can put their resources together and build a home with sharing facilities and utensils. For example: We don’t need a separate utility room, garage, shed, etc. All of that can be shared.

          Great you are doing this and hopefully this will be a template for many others.

        • Bamboo

          Hope the fodder crisis won’t impact the walls.

      • BamBon

        “The one sliver lining on the ‘planning permission shenanigans’ cloud is that in Ireland there is an ‘exemption’ for detached structures limited to max 25ms area by 4m height.”

        That was/is the the case for an extension cica2000 but not for detached structure deigned for living in, farm structures have certain exemption and size is not so much the issue

  16. molly

    Financial Regulator now there’s a name,it feels like that name should have changed to the fool on the hill.
    If trackers go up to 5/6 percent will the banks go bust or will another bail out take place it feels like it will be so.
    Banks need to shed thousands of jobs at a time when we should be holding on to as many
    jobs as possible.
    Trust with banks is gone I wonder how many people sold there houses at a good time and while waiting for the house prices to go through the floor bought bank shares.

  17. ”The reason they need deposits is because they have to get their loan-to-deposit ratio, which went ballistic in the boom, back to prudent levels.”.

    Glad to see it’s not because they lend out other people’s deposits.

    • bonbon

      The bail-in, now official policy of the EU and Switzerland, is to take other peoples deposits, simple as that.

      Not sure what yer getting at.

      • Hi Bonbon, When the banks are looking insolvent they need to reduce their liabilities.

        One way to do this is to ‘delete’ money from people’s accounts since your bank balance is the banks main liability. This is what happened in the bail-in.

        I’m not supporting the bail-in but I think it’s important to note that money isn’t transferred from people’s accounts to the governments or elsewhere – it’s simply deleted. Hence it’s not robbery in the sense that no-one walking away with the money.

        What I was getting at above is that many economists would think that banks need to attract deposits so that have money to lend – However banks create the money they lend and I’m glad that David hasn’t supported the misleading notion that banks lend out other people’s deposits. (Although he has done so in the past)

        • bonbon

          As to “deleting”, a ordinary robber deletes your wallet contents. Who cares if he keeps it or not, it is theft! It is property seizure. Sorry if I take the depositors side in this.

          The best way to explain your point, is to show the difference between Credit and Monetary circulation. This is crystal clear with Alexander Hamilton’s concept. A developing economy will spin off savings, but to reconstruct that economy from rubble needs Credit (ala Marshall Plan or RFC/New Deal). The dangerous carry-on of Bernanke/Draghi/Greenspan/housing bubbles, is in my opinion an attempt to muddy the waters to prevent Glass-Steagall and Hamiltonian banking.

    • bonbon

      Are you implying DMcW is trying to distance himself from the “savings” theory of economics, now that the EU is applying that forcefully, robbing deposits to “help the economy”, sorry banks?

      then you might have something there a grain of truth, perhaps?

  18. molly

    When the banks here start to run out of money ,it stands to reason they will go after there deposit savers aided by the government .

  19. Bamboo

    I don’t know if anyone can remember the ads around 2007/2008. Some banks are particularly active with their ads to create guilty feelings on the parents. These banks were insinuating that parents should do the right thing for their children. Parents should give their children a chance to get on the property ladder by releasing equity on their own house.

    This was all allowed by the so called policing bodies and our government. And when the full-blown crisis is so in your face I was phoned a couple of times by my bank to ask if I was interested in a loan.

    Regarding the apartheid – Ireland is full of apartheid. The colour of your skin is not the issue but the car you drive, the year of your car, the mansion you own, the number of properties abroad and at home you own, the foreign holidays you take (especially florida and New York at xmas time) the area code you live, the clothes you wear, the private school your kids go to, what side of Dublin you live, the tyope of sport you play, etc, etc, etc. During the boom you can impress how much money you are making and now you can impress by how much money you’ve loosing.

    All of this is crucial to separate one group from the other. This system is encouraged and stimulated by all the governments that we’ve had so far. The local TD system is based on stimulating this apartheid. Without this apartheid system, there is no local TD.

    • molly

      The banks and the government played a big part in the down fall of this country.
      The banks offered me large sums of money over a couple of years.
      The government where quite happy to take large sums of money in stamp duty and to make things even worse the government now wants property tax.
      Banks part in all this is so black and white that they are quite prepared to hang people out to dry.
      My thinking on this is don’t let them get away with it and the same with this cowboy government .

  20. 5Fingers

    The highlight of this article is that it shows how uniform European policies are acting like a wrecking ball on the rest of Europe. The Euro distorted real prices and real value of labour and property. The fix for the resulting mess is about taking back the toys the poor unwashed were not supposed to have in the first place.

    The general lack of backlash (or announcement of same) suggests no one cares or few are that bothered. So life will proceed as normal. Maybe it is the blind belief in that sustained normality is what keeps the show on the road. Even if the veil slips to reveal the enormity of our loss (democracy etc) will anyone care as long that they themselves are OK?

  21. Deco

    This is important !!!!!!!!!!!!!!!!!

    The blog site NAMA Wine Lake, is being threatened by legal representatives from NAMA.

    http://namawinelake.wordpress.com/2013/05/05/how-paul-tweeds-johnsons-solicitors-are-trying-to-muzzle-the-namawinelake-blog/

    David,
    Can you pass this to Brian Lucey (who is also a massive critic of the NAMA quango) and Constantin. And do not publish any recognition that you are doing so on this site. To do it silently, is preferable.

    NAMA are being unaccoutable, as usual, like most of the institutional state complex in this country.

    In fact they are even trying to shut people up, for talking about NAMA. This has gone beyond the absurd. The Laws in this country on “right to good name” can be used as a weapon to defend a joke that is NAMA. NAMA has no good name. It’s name is junk. Yet, under Irish law, it has a “right to good name”. And it is using this to threaten people who make public information concerning it’s dealings, to the public who actually pay for it.

    This is so bad, you could not make it up.

    Pass it along folks. This is not being covered by the media, possibly because everybody needs to be nice to the NAMA (with it’s big budget for real estate advertising).

    • bonbon

      Are you claiming “right to good name” is law? That is extremely important. This is “lese Majeste” as is known from various European laws which boils down to the utterly feudal savagery : “the greater the crime Majestee committed, the greater right it has for protection from anyone pointing it out!”. In other words savage bank deposit robbery and eviction means greater legal protection for the perpetrator!

      A European version of “saving face”. Is this why you wish to protect DMcW?

      This kind of feudal savagery was used in Germany in the 60′s and a perverted version of Chapter 7 in the 1980′s in the US!

  22. TrackerMan

    OK – It is well known that the country has a problem with tracker mortgages, but a commercial bank’s blended cost of funds has always been higher than the central bank marginal lending rate (in a normal banking environment), given the mix of funding sources (deposits / interbank / structured vehicles / equity etc). So when ECB rates rise, this will be felt hardest, initially, on non tracker mortgages. as their cost is based on a margin of say 4.0% over ECB rates, (right now ECB @ 0.5% and most variable rate mortgages are circa 4.5% I guess) – if this margin is maintained with ECB at 3.5%, then variable rates would be 7.5% and trackers at 4%. Anyhow point is variable’s will always be higher, but I get your point when you say as a multiple of monthly repayments (from current levels) tracker holders will feel the greatest net cash impact on their pockets.

    OK – so we know what would happen if a certain set of events were to occur – so surely the question then becomes – should tracker holders purchase a financial product that provides them with a positive cash flow in the event of ECB rates rising and what product would best suit this purpose over a 10 -15 year time horizon, so as to “hedge” the tracker borrower into a position where he / she is in a no better / no worse position that he / she is in today – in effect taking out the impact (to a large extent of ECB actions over the medium term horizon)

    Obviously having two different contracts (mortgage & hedging product) with two different counterparties is not optimal from a risk management perspective, but given the quantum of the problem facing trackerville as you call it – there are no easy solutions here, with basis risk / rollover risk / underlying reference rate risk being some of the many impediments to such a structured solution.

  23. does Julius Ceasar have a solution to the current debt crisis. Some things just never change!

    http://princetoneconomics.blogspot.ca/2006/06/great-monetary-crisis-of-53-bc.html

    • joe hack

      What sort of money did they use back then? was it silver bronze gold?

    • bonbon

      Are you proposing this, or is this an “observation” ?

      The analysis misses something not observed, Capri and the Mithra cult. That can be traced through to the 4th Rome, via Byzantium, Venice, Bank of Amsterdam, Bank of England, to today’s global British Empire. And from Babylon to Capri. Look at the winged lions in Venice for a start!

      Shakespeare knew this, the fault lies not in the stars, but that we are underlings.

      Dump that servility and pass Glass-Steagall – we have nation-states, badly cripled.

  24. bonbon

    And what about this :

    Tenants must be protected in repossession cases – Doherty

    Fears grow that the Land and Conveyancing Bill will lead to a significant number of repossessions of buy-to-let properties that could lead to an increase in homelessness. During the boom, banks issued over 150,000 buy-to-let mortgages. Today more than 30,000 of these are in serious difficulty.

    The point here is the Gov’t must step in to protect tenant agreements. I know DMcW has covered the statistics before.

  25. oe1

    The state has a vested interest in property values with the valuation tax, 0.18% probably rising to 0.207%. So now, there is a good economic arguement for the state to the buy up boom time variable mortgages and lend at affordable rates, e.g. not rock bottom rates, but perhaps 3 to 4% maximum. I think something similar happens in the US homeloan market with Fanny Mae.

    Governments supporting accomodation costs is nothing new around the world. In the UK the government is now helping with home loan deposits. Germany has rent control which is a form of state subsidy for tenants. Ireland has traditionally a preference for home ownership, which gives the subsidy to home buyers.

  26. shivym

    The property market seems to be heating up again & there seems to be a real scramble for certain houses with protracted overbidding despite the property tax, increased salary taxes etc. I hvnt figured out yet if this is a temp trend or the start of a new bubble. People seem to be losing the run of themselves again. Any thoughts?

    • michaelcoughlan

      Hi,

      Some people are so well off they are prepared to pay a premium to live in an area where they want to live. The market sets the price. McWilliams hates houses so you won’t get anything objective from him on this issue.

    • Bamboo

      what would you like to hear, shivym?

  27. crazy cat

    Hello all,

    Off the subject, I know, but here is an analysis from Serge Halimi in this months Monde diplomatique, ‘ Tyranny of the one per cent’.

    http://mondediplo.com/2013/05/01tyranny

    • Bamboo

      Thanks crazy cat,

      An article worth reading indeed. it sums it all really.

    • 5Fingers

      Not that far off the subject at all. It really shows how intellectually cornered all our notions of democracy really are. The freedoms have been whittled away.

      There was a time when you accepted that rich people could bully you more easily and could pay for the lawyers. It did not seem to affect most of us. That is now changing.

      Trackerville is but a derivative activity where the little people are brushed aside. Al there articles are about all the things that happen to little people. So we all drone and worry on and on about the little people stuff, and the little parochial politicians and our little developers and the little guys in the EU CB as though it’s like weather. All you can do is put up the financial equivalent of an umbrella assuming it works or is not taken away from you.

      If the little people were not worried, there’d be no one on this blog. We all come here to cry and whinge and make sense of what is going on and some say it is terrible and preplanned and utterly manipulated from hundreds of years ago and others say it’ll be all right just hang on there. I do not agree with either. I think the little man is about to become a nano man simply because it is possible and there are enough contented to just sit back and watch the show. Biafra on on your doorstep so to speak – you’ll be ok if you call 999

      In the meantime, there’ll be a lot more books and magazines and blogs like this to read and confirm all your suspicions. Will you do anything? Will you what? That’s the tragedy of today folks.

        • Bamboo

          You’re absolutely right. We seem to be still in a very angry state of mind and it is not easy to get out of it. Finding solice in a blog seems to help a bit.

      • bonbon

        What makes one little, is the belittling mesmerizing of monetarism. The awe and wild-eyed belief that money is the key (and I know those in desperate tracker staights might have a fit) by “experts” and “anti-experts” alike is totally shocking.

        What in the name of God made bus passengers want to sound like financiers, perhaps little copies of that arch swindler Soros ?

        Glass-Steagall is for those sick and tired of being little.

        So grow up!

        • joe hack

          Bamboo has a point, don’t you think some here are demonstrating their anger bonbon.
          if only we got real mad but with vision and focus.

        • michaelcoughlan

          “What makes one little, is the belittling mesmerizing of monetarism”

          What makes people little is the belief that some one some where can change a law and make everything right for them.

          What makes them big and strong is to take personal responsibility for their own circumstances irrespective of the
          establishment hegemony. Most people are able bodied intelligent and creative. There isn’t a thing in the world stopping them from acquiring a skill to provide a good or service required IN THE CURRENT CIRCUMSTANCES which will empower them and to trade that good or skill whether glas stegal is in place or not. They could trade it in a barter type system or use bullion. The government simply couldn’t intervene glass stegal or not.

          • joe hack

            What have you got that is worth a broken printer in need of new drive belt I will exchange it for a laying hen or maybe a sack of spuds gold will not be considered but I might take other earthly stuff I could use some cut stone to build a cooker with ,a barbeque

          • michaelcoughlan

            If you fix the printer I will give you one 1oz silver philharmonic coin current value approx €24 euros or so.

          • bonbon

            The mental disease has struck the Gov’t and made them small, and look what they did to “CREATE THE CURRENT CIRCUMSTANCES” !

            The difference between humans and animals or vegetables (and liberals), is we know the future determines the present. Glass-Steagall ia all about being human, let the liberls wallow in the current circumstances.

  28. crazy cat

    Hi Bonbon,

    If I have understood your Glass-Steagall at all, I think this is the result that came about in France with their so called laws of speration, or ‘ La régulation bancaire’, as its called.

    I havent put it up before as it’s in French, so all the best with translation.

    http://blog.mondediplo.net/2013-02-18-La-regulation-bancaire-au-pistolet-a-bouchon

  29. lff12

    “Therefore what we are seeing is a type of financial apartheid in Ireland. Those on trackers have special treatment – they are the white South Africans of the credit world. Those who are on variable rates or are looking for credit to keep their businesses going are the black population, discriminated against in banking and credit.”

    I think this is an interesting phenomenon and deserves discussion.

    1. A lot of very diverse borrowers would have trackers. Some would be still in good jobs, making good money, doing nicely, and the tracker might at least partially compensate for their CURRENT state of negative equity.
    2. On the other hand, there will be a lot of borrowers for whom trackers are a godsend as they marginally reduce interest to the point where their mortgage is payable. That’s not entirely a bad thing in ways, as the odds of them actually paying the full amount (and thus meaning a smaller rather than larger loss). I’m not fully convinced by the school of thought which writes off forebearance as bad, because I think the danger of what is done in other countries is further devaluation of sensitive housing stocks and downgrading of already fragile banks, plus the cost of rehousing repossessed former homeowners would fall squarely on the taxpayer – anybody I know who has been through this is basically now permanently on welfare with rent allowance – HUGELY expensive for the tax payer as the danger with RA is it incentives the recipient to basically never work again.
    3. I agree, however, that the real victims in the long term may be those who currently want to borrow, as they either a) will lose that business due to lack of credit or b) continue to be gouged by our legendary greedy landlord class who viciously exploit the current lack of credit to force rents back up again (thus not only denying them home ownership, but forcing them to pay more for the dubious privilege of renting – which is exactly what caused much of the panic in the first place). But group a) are worse hit, because effectively they risk bankruptcy and lose jobs.
    4. Whats the solution? I don’t know. The only suggestion I can make is a move back towards the council loans more common in the 60s and 70s for lower income earners. Again the danger is that if the evidence of the SOS housing schemes is anything to go by, lower earners are far more at risk of falling behind (apparently the default and arrears rates on those schemes are WAY ahead of the commercial normal mortgage packages – which questions if home purchase is the best solution for low earners – especially where there is little alternative).
    Alternatively, incentives to live in “low housing demand” areas to make use of existing properties. Council managed rent schemes to rent ghost estates under NAMA at generous rents? These are just some ideas. But all I can see right now is a quiet effort to reinflate the housing market in order to milk the dead cow once more . . .

  30. [...] The tracker tale’s sorry ending | David … – Do you remember the ad in which a bloke on the top floor of a Dublin bus stands up and admits to all the passengers: “I don’t know what a tracker … [...]

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