Department of Finance report on Risk Weighted Assets and mortgage rates

NoRegretsCoyote

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Some coverage on this topic, and why non-bank lenders might be able to undercut mortgage rates quicker than banks. I haven't fully read yet.

https://www.irishtimes.com/business/non-bank-mortgages-key-to-cutting-irish-interest-rates-study-finds-1.3820799?mode=amp

https://www.goodbody.ie/assets/Goodbody_Morning_Wrap_11_March_2019.pdf

The thust of the Irish Times story today is that new entrants would face a lower cost of capital.

Can someone explain how non-banks would be allowed by the regulator to use lower risk weights than the incumbents?
 

Brendan Burgess

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Can someone explain how non-banks would be allowed by the regulator to use lower risk weights than the incumbents?
The capital rules are there to protect the depositors in the banks.

As the non-banks have no depositors, they are not subject to capital regulation. If they have big losses on Irish mortgages, their shareholders lose out - there would be no depositors at risk.

Brendan
 

RedOnion

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Sarenco

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Thanks for posting that Red.

It's an interesting read for anybody that's genuinely interested in understanding current mortgage rates.

The graph at page 20 really does graphically demonstrate the extent to which Ireland is an outlier in European terms.

It's actually surprising that Irish mortgage rates for new home loans aren't higher in the circumstances. Depressing, perhaps, but true.
 

RedOnion

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