Department of Finance report on Risk Weighted Assets and mortgage rates

NoRegretsCoyote

Registered User
Messages
2,669
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...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

Founder
Messages
43,750
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

can edit posts
Messages
5,813
For anyone interested, here's the full Dept of Finance report:

https://www.gov.ie/en/publication/f...-ireland-the-link-to-mortgage-interest-rates/

There's a lovely graph in page 20 that shows the interaction between RWA and Interest rates.

There's also an interesting table in the appendix that shows headline rates, and APRC for each country from ECB data.

Now, I need an idea for another thread to see if a report gets commissioned...
 

Sarenco

Registered User
Messages
6,718
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

can edit posts
Messages
5,813
Top