Friday, April 17, 2009

Valueireland.....get your facts right!

The emergence of a number of consumer advocates and related websites and blogs has been great in recent years. The more information that people can access the better in my view and as a consumer advocate myself I am all in favour of competition. With their websites and blogs people like Brendan Burgess and Damien Mulley are providing a great service to consumers on financial and technology/communications issues respectively. Likewise Conor Pope (Irish Times) and Tina Leonard (Smart Consumer-Irish Indo and RTE) have emerged as really good contributors on issues affecting Irish consumers by putting information in the public domain. And Charlie Weston's War on the banks has done more for mortgage holders than the rest put together. And of course there are excellent websites such as Thrifty pages and Cheapeats which provide practical information to assist people to save money and get a better deal in these less affluent times. Into that mix I would have to add which was set up by Diarmuid McShane, which does provide information and advice as well as indulging in some "commentary".

Now anyone reading Diarmuid's blog would know that he is not a fan of the Consumers' Association which I chair. In fact he goes out of his way to criticise or to find fault with almost everything that the CAI does. He used to be a member of our Council, but lets say we had our differences and to make a long story boring he resigned. He has given his side of the story to the reasons why, in fact ad nauseum on his blog, but there are two sides to every story. I could give my views, however to be frank I think 99% of you would be saying cop yourself on and write about something that is of interest to me and consumers in general, and you would be right!

Its a free country so if he wants to lash CAI everyday, then so be it, nothing worse than being talked about than not being talked about as they say. Indeed some people have asked me what is his strange obsession with CAI, only he can answer that. I just think its a waste of time and energy to be so negative when he could be using the space to be of better use to consumers. There have been times when I have disagreed or found fault with aspects of what other consumer advocates have said, but I have refrained because I believe that it does not serve consumer interests for us to be bickering. That only serves the interests of those who want to see consumer rights undermined and diminished. For that reason, I haven't responded to his attacks.

Is Mortgage Interest Relief a bailout....I say...No, No, No.

However Diarmuid's latest salvo against me and CAI is not only incorrect, but would if unchallenged be very bad news for mortgage holders. He claims that I am advocating for a "bail out" for mortgage holders on a fixed rate. He says;

Referring to banks being bailed out and using that as a precedence for bailing out home owners, as advocated by Mr. Doorley, is an extremely dangerous suggestion and hints that we proceed down the road of two wrongs making a right when it comes to the dire financial affairs that we’re in at the moment.

Of course I never said that. This is the article where I was quoted. The context was the decision by Government in the Budget to abolish mortgage interest relief on mortgages of 7 years or more. This will have a major impact on the over 250,000 people who took out fixed rate mortgages between 1997 and 2002 for example. While some may have switched to a variable rate, many wouldn't have.

Fact number 1.
The Government stated that the reason for the abolition of Mortgage Interest Relief (MIR) for these mortgage holders was that interest rates and repayments had come down in the last 6 months. Yes that's true for people on tracker and some variable interest rates, but not true for people on fixed rate mortgages, they are paying the same as they were in October 2008!

Fact number 2
I stand over my view that by abolishing MIR for fixed rate mortgage holders that the Government are abandoning people lumbered with large repayments. MIR has been a long standing support which Governments gave to assist people who buy houses to live in! The vast majority of the people on fixed mortgages who have been in contact with me, don't expect that they can switch to a variable rate at will and with no cost. They know they are in a contract with upsides and downsides. However they rightly don't understand how a Government can find €7bn to re-capitalise banks, while cutting supports which cost less than 2% of that or €128m to homeowners who didn't cause this mess.

Fact number 3
I have never stated or even "hinted" that people in fixed rate mortgages should be "bailed out" as Mr. McShane refers to it and be able to switch to a variable rate at no cost. I do think there are huge question marks over the penalty fees being requested and being charged by banks for people who switch and I would like to see independent oversight of that.

Fact number 4
I have questioned the actions of some banks and will continue to do so who have been very slow to pass on ECB rate cuts to people on variable rate mortgages. I don't think that the financial services fraternity have quite understood that the rules of the game have changed. The taxpayer and consumer have bailed them out for their reckless and feckless behaviour, so when the ECB cuts interest rates to assist consumers and business and stimulate the economy, the idea that they can gobble up the benefit must be challenged.

The assertion that MIR is akin to a bailout is also dangerous, because the Government is considering its future and has asked the Commission on Taxation to examine it. We all know that the first few years of a mortgage are the hardest and many people on all types of mortgages have factored in the MIR. Over 235,000 people took out fixed rate mortgages between 2003 and the end of the third quarter last year. If the Government did abolish MIR for first time buyers, then many would be in severe difficulty. That must be prevented at all costs. That is why suggestions or assertions that MIR is some kind of bailout would be manna from heaven for those who would like to see it abolished.

So hopefully Mr. McShane will set the record straight.... and perhaps tell us where he stands on mortgage interest relief as well, which is the really important issue here which we all should be working together on to retain.