AIB display prudent lending policies

I see that AIB have now started "stress-testing" mortgage applications at 5%. Stress-testing is a process by which a lender evaluates an applicant's ability to repay a loan if interest rates increase.

Given that their actual variable rates for new customers vary between 2.25% and 2.65% they are factoring in potential future rate increases between 2.35% and 2.75% in assessing a customer's ability to repay. This is well in excess of the Financial Regulator's guidelines on stress-testing and AIB are to be commended for it. It may result in their losing business to competitors who will stress test at a lower rate, but recent events have shown that being the lender who will offer the biggest loan isn't necessarily a good thing.

Negative Equity explained

Article from the Irish Independent explaining the impact of negative equity on homeowners, with contributions from yours truly.

http://www.independent.ie/business/personal-finance/property-mortgages/homeowners-stuck-in-a-trap-1743504.html

Irish Nationwide - Burgess was right

It was heartening to hear Brendan Burgess receiving repeated applause when speaking at the Irish Nationwide AGM yesterday. Brendan had been a long-time critic of many Irish Nationwide policies and of its former Chief Executive, Michael Fingleton. I had attended two previous AGMs where he was heckled for speaking out while Mr. Fingleton was praised for bringing in profits to the society. Now that we all have seen the costs of these profits and the unacceptable risks taken to achieve them, at least the members have accepted that Brendan Burgess and his fellow dissident member, Shane Hogan, were right to criticise the board. It's only a shame that they weren't listened to before the society was brought to the brink of destruction by the actions of their board and former chief.

It's not as publicly known, but Messrs Burgess and Hogan also forced Irish Nationwide to drastically improve their treatment of borrowers in arrears and many Irish Nationwide borrowers may have avoided repossession because of this work, whether they realise it or not.

Related links: -

RTE News

Irish Independent

Irish Times

More good news from the European Central Bank

The European Central bank has today announced a further rate drop of 0.25%, to bring the main refinancing operations rate down to 1%. This reduction will knock about €12.50 per month per €100,000 off a 25 year mortgage IF your lender passes the cut on in full.

It won't, of course, do anything for you if you're in a fixed rate.