Some personal finance queries answered
Q: I switched my mortgage to the newly relaunched National Irish Bank over three years ago, as they offered a very competitive rate and promised value for money for Irish customers.
Today the ECB rate is 1.5 per cent yet NIB are refusing to pass on rate cuts to customers. NIB’s variable rate is 3.65 per cent, more than double the market rate, making them a margin of 2.15 per cent. These are the same people who told us Irish banks were ripping us off when they entered the market. Now it looks like NIB’s personal customers, who never miss a repayment on their mortgages, may be subsidising their toxic corporate bad debts?
Have you any suggestion for NIB mortgage customers – do we have to keep switching to another bank to get a better rate? – Mr B., Dublin
A.National Irish Bank became the first in the current cycle of falling interest rates to stop passing on the benefit of those rate cuts to its mortgage customers – meaning that they will fail to see the effects of the most recent half percentage point European Central Bank rate cut on their mortgage bills. Rival Ulster Bank is considering its position.
Part of the problem is the disparity between the ECB rate and the actual rate at which banks are finding it possible to raise funds on the money markets. The higher cost of funds in the market rather than any desire to pad margins is, at the moment anyway – a more likely driver of NIB’s decision, although, like their peers, they are trying to come to terms with increasing bad debts on their loan book.
When you say NIB’s variable rate is 3.65 per cent, “more than double the market rate”, that is not quite true. It is more than double the current historically low ECB rate but the real issue is how it compares with other rates. The most competitive variable rates are currently around 3.2 or 3.3 per cent APR.
As to your options, there really is very little you can do except consider moving to another lender. And even that is no longer as simple as it was in the bubble days. Banks are being particularly cautious in which customers they will extend credit to and there will inevitably be costs involved in switching lenders.
After all that, there is, of course, no guarantee that any new lender will continue to pass on further rate cuts in full.
My spouse and I have a gross income made up of pensions and dividends. For this current year, our gross income will be well under the new limit for a couple of €73,000.
The HSE helpline says that I am no longer entitled to a medical card because as my eligibility is taken from the total of my pensions for this year (2009) together with my dividend income for last year (2008). I pointed out that my dividends are greatly reduced for 2009 owing to the Banks not paying dividends. However, they say that their guidelines state that I must only use last year’s dividend figures.
This is an extraordinary position and can hardly have been the intention of the legislators. It would mean that someone who last year would have been within the new limits and this year had an increased gross income over €73,000 would be entitled to a medical card, whereas someone with a reduced income this year would not. I find this to be both incomprehensible and unjust. Are the HSE making an incorrect decision here?
– Mr J.H., Dublin
A.The truth, I imagine, is that the Health Service Executive is just as confused about the nuts and bolts of the arrangement as everyone else appears to be.
Certainly, Age Action and other lobby groups representing elderly people maintain there are very mixed messages being given to people over-70 by HSE helplines and elsewhere.
I can certainly see the logic of the situation you outline, awkward as it is. It effectively goes on known income. You know what your pension income is as it is preordained and you certainly know what last year’s dividend income was – as it was paid to you in one or two tranches over the course of the year. On the other hand there is no clarity yet as to whether you will receive any dividend income this year.
Still, it doesn’t make it any easier, especially when the department is asking people over 70 effectively to conduct a means test on themselves.
On the back of queries such as yours, we spoke in detail to the HSE last week to clarify the position on income eligibility.
Its spokesman, Paddy Burke, told our reporter that the assessment can be based on an individual’s current level of income. He also confirmed that, if an individual believes they will not receive dividends this year, they can calculate their income on that basis for the purpose of the means test.
There it is then. The official word from the Department is that you can suit yourself – rely either on last year’s dividend income or on the assumption that you will receive no income this year.
Please send queries to Dominic Coyle, QA, The Irish Times, 24-28 Tara Street, Dublin 2 or by e-mail to dcoyle@irish-times.ie. This column is a reader service and is not intended to replace professional advice.
Due to the volume of mail, there may be a delay in answering questions. All suitable queries will be answered through the columns of the newspaper.
No personal correspondence will be entered into.
