Wednesday 13 December 2017

How to fight back: Our top tips on beating the bankers as they strive to grab your money

JUST when you thought it was safe to venture out, the bankers strike again.

Presenting Bank of Ireland's 2011 results this week, its chief executive Richie Boucher held out the prospect that variable rate mortgage borrowers could soon find themselves paying even more for their homeloans.

According to Boucher, although Bank of Ireland managed to cut its annual losses from €950m to €190m in 2011, it wants, a bit like Charles Dickens' Oliver Twist, some more.

The Bank of Ireland boss argues that while, courtesy of a €4bn digout from the Irish taxpayer, his bank is now losing a lot less money that it used to, its net interest margin -- the difference between what it charges its borrowers and what it pays its depositors -- had narrowed from 1.46pc and 1.33pc as all of the remaining banks compete desperately for deposits.

While this competition is good news for depositors it is seriously bad news for borrowers, particularly those homeowners unlucky enough to have variable rate mortgages.

So what, if anything, can variable rate mortgage borrowers and other borrowers do to prevent their bank gouging them in this manner?

Repay existing loans as quickly as possible. With Halifax after disappearing from the Irish market altogether and AIB, EBS, Permanent TSB and Irish Nationwide virtually wholly State-owned, there is now virtually no competition between the banks for loans. Borrowers pretty much have to take whatever terms the bank offers. If you owe the bank money repay it as quickly as possible.

Hang on to your tracker for dear life. If you are one of the homeowners lucky enough to have a tracker mortgage, about 53pc of all mortgages, then don't even think of allowing your bank to move you to a variable rate mortgage.

Borrowers on trackers, where the interest rate is tied to official ECB rates, are currently paying an interest rate of 1.75pc-2pc as against the 4pc-plus many variable rate customers are paying.

Tear up the plastic. One of the few encouraging developments of the past few years is that Irish borrowers are tearing up the plastic with total credit card debt down from €3bn in 2008 to €2.6bn today. Over the same period close to quarter of a million credit cards have been torn up.

You should do the same.

Don't place all of your financial eggs in one basket. While the problems of some individual credit unions have recently been well documented, the fact is that, with competition having effectively disappeared from the banking market, the credit unions are now the only alternative for most people who have been refused a loan by a bank.

If you aren't already a member, join your local credit union today.

Don't borrow unless you absolutely have to. Despite occasional claims to the contrary from assorted Government ministers, it's still truly terrible out there. Consumer confidence is on the floor and most businesses are struggling to get by. All of which means that now is a very, very bad time to be thinking of borrowing money, even if you can somehow persuade a bank to part with the cash. So if you are thinking about borrowing money think again.

Remember, The banker is not your friend. Even when conditions eventually improve we should never, ever forget the lessons of the past four years. Despite what all of their expensive advertising campaigns would have you believe, the banker is not your pal.

When things go bad, your apparently smiley, cooperative banker quickly morphs into a vicious predator.

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