It's Official, Ireland's Great Mortgage Rate Rip Off
- Thread starter IdesofMarch
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Just for clarification purposes, are you saying that the cost of Irish Bank's loan books is identical to banks in the rest of the EU? If you can show me the figures that reflect the cost of tracker mortgages, the cost of non-performing loans, the cost and difficulty of repossession, the low recovery rates of defaulted loans, the inability to sell non-performing loans off their books compared to their European counterparts, then we can start using terms like RIP OFF. The Central Bank has said mortgage rates are the highest in the EU. There are a lot of things that cost the most here compared to other countries. It doesn't mean it is a RIP OFF.
Banks take legal action. They are politically attacked. Banks sell non-performing loans. They are politically attacked. Banks close branches and reduce costs. They are politically attacked. What do people want? Irish banks have proven themselves to morally bankrupt and completely inept in the past but there is no point going on about RIP Off mortgage rates unless we accept that there is a cost to lower rates. If Irish banks are allowed to do all those things that are not politically nice and they continue to charge mortgage rates that have no relevance to their cost of business, then we can talk again. If the margins on Irish mortgages were so big, you can guarantee that foreign banks would have moved in long before now. They are nowhere to be seen because the Irish mortgage market is not attractive.
Having recently booked a hotel in Dublin for visiting friends from the US, I can happily talk about RIP Off prices from a sector benefiting from a special rate of VAT if you want.......
Brendan Burgess
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Guys
This is an important topic.
You should be able to disagree without making offensive comments about one another. All such posts will be deleted, no matter how long or brilliant they are otherwise.
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Brendan
This is an important topic.
You should be able to disagree without making offensive comments about one another. All such posts will be deleted, no matter how long or brilliant they are otherwise.
Do not respond to personalised comments. Either ignore them or report them.
Brendan
Sunny, start up a thread on rip off hotel prices if you want. However with regard to this Thread, if Irish banks charged borrowers the same as they do in Finland (currently under 1%) there would be no repossessions as borrowers would be able to make their monthly repayments, subsequently there would be no need for costly litigation (again, Ireland dearest in the EU in this regard), as a consequence, there would be no delinguent loans, so there would be no need to sell these loans on as they would all be performing. However this is not happening, welcome to RIP OFF REPUBLIC.
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Sorry, but that is so simplistic it is not even worth discussing. Even if Finland are charging under 1% for a mortgage, show me how that proves that Irish rates are a RIP OFF. Do you want me to list all of the things that are more expensive in Finland compared to here? All I have seen here is a statement from the Central bank STATING that Irish Mortgages are the highest in Europe and then a whole lot of broad angry statements.
Prove to me that Irish banks are operating in a cartel to rip people off. Show me a detailed comparison between Irish mortgage rates v Finnish mortgage rates. How much is variable v fixed? Are the variable mortgages trackers? What the LTV's of the mortgages? How much does it cost and how long does it take to repossess a house in Finland? What is the cost base of Finland's banks compared to Irish Banks? How much of Finland's banks loan books is impaired? What's the cost of capital for banks in Finland v Ireland? Is there State ownership of banks in Finland? Don't the State offer guarantees on % of the mortgages over there? How does that impact the pricing?
As for the low rates = no repossessions or delinquency argument, how did work out for Irish banks who were throwing out low margin trackers like confetti in the good times?
That's a very simplistic take on things. And a major generalisation.
Anyways, there are practically no repossessions here regardless
Sunny,
Prove to me that Irish banks are operating in a cartel to rip people off.
Well I can't do that, (save for an insider whistleblower (maybe yourself or some banker who grows a conscience)), otherwise that could never be proved) but if I could prove same, I would not be posting such information on this Forum. I would be off to the European Commission with that particular nugget.
Show me a detailed comparison between Irish mortgage rates v Finnish mortgage rates. How much is variable v fixed? Are the variable mortgages trackers? What the LTV's of the mortgages?
Chief economist at Finnish bank Aktia, Heidi Schauman, says that the reason why mortgage rates are so low in Finland is that they are linked to variable market rates.
"They're so-called short-term interest rates. In the rest of the eurozone longer-term, fixed interest rates are more common and borrowers pay a premium for that,"
Sunny, you see in Finland most housing loans are based on 12-month Euribor rates, (so most are Trackers and the EURIBOR is currently in negative territory) which are adjusted every 12 months. When those rates rise, Finnish housing loan borrowers will notice the increase. Those rising costs depend on the sort of loan that was taken, but the majority are variable. Hang on a second, the variable rates charged by banks in this Country are higher, in fact Sunny, they are the highest rates in the Eurozone. Maybe part of this extra cost that borrowers in Ireland are burdened with, has to do with funding the huge wages and pensions of bankers (the cost base). I see that the Irish taxpayer had to fork out a BILLION euro (yes, a BILLION euro) to re capitalise AIB pension deficit alone. Hmm but that so simplistic that it is not worth discussing. LTV's are broadly similar to Irish LTV's for new mortgages. Its a rip off plain and simple.
Prove to me that Irish banks are operating in a cartel to rip people off.
Well I can't do that, (save for an insider whistleblower (maybe yourself or some banker who grows a conscience)), otherwise that could never be proved) but if I could prove same, I would not be posting such information on this Forum. I would be off to the European Commission with that particular nugget.
Show me a detailed comparison between Irish mortgage rates v Finnish mortgage rates. How much is variable v fixed? Are the variable mortgages trackers? What the LTV's of the mortgages?
Chief economist at Finnish bank Aktia, Heidi Schauman, says that the reason why mortgage rates are so low in Finland is that they are linked to variable market rates.
"They're so-called short-term interest rates. In the rest of the eurozone longer-term, fixed interest rates are more common and borrowers pay a premium for that,"
Sunny, you see in Finland most housing loans are based on 12-month Euribor rates, (so most are Trackers and the EURIBOR is currently in negative territory) which are adjusted every 12 months. When those rates rise, Finnish housing loan borrowers will notice the increase. Those rising costs depend on the sort of loan that was taken, but the majority are variable. Hang on a second, the variable rates charged by banks in this Country are higher, in fact Sunny, they are the highest rates in the Eurozone. Maybe part of this extra cost that borrowers in Ireland are burdened with, has to do with funding the huge wages and pensions of bankers (the cost base). I see that the Irish taxpayer had to fork out a BILLION euro (yes, a BILLION euro) to re capitalise AIB pension deficit alone. Hmm but that so simplistic that it is not worth discussing. LTV's are broadly similar to Irish LTV's for new mortgages. Its a rip off plain and simple.
The CCPC reviewed the Finnish mortgage market as part of a broader report published last year on the Irish mortgage market. Here's an except:-
"In terms of loan book risk profile, according to a 2016 report issued by Davy Stockbrokers Finland’s defaulted stock to total stock was 1.2% (in Ireland by comparison it was 18.1%), while the risk weighting of mortgage assets was 11% (for Ireland it was 50%). On the basis that default rates and low risk weightings result in lower capital requirements, this would in part explain Finnish new business variable mortgage rates being comparatively low at 1.09% compared to 3.07% in Ireland."
Other notable differences between the Irish and Finnish mortgage markets include a government guarantee in favour of the lender on loan amounts above a certain level and the charging of significant loan arrangement fees to borrowers.
In other words, comparing the Irish and Finnish mortgage rates is fraught with difficulty - structurally they are very different markets.
But hey, why let the facts in the way of a good rant...
https://www.askaboutmoney.com/threads/average-mortgage-rate-in-finland-1-09-tracker.204031/
"In terms of loan book risk profile, according to a 2016 report issued by Davy Stockbrokers Finland’s defaulted stock to total stock was 1.2% (in Ireland by comparison it was 18.1%), while the risk weighting of mortgage assets was 11% (for Ireland it was 50%). On the basis that default rates and low risk weightings result in lower capital requirements, this would in part explain Finnish new business variable mortgage rates being comparatively low at 1.09% compared to 3.07% in Ireland."
Other notable differences between the Irish and Finnish mortgage markets include a government guarantee in favour of the lender on loan amounts above a certain level and the charging of significant loan arrangement fees to borrowers.
In other words, comparing the Irish and Finnish mortgage rates is fraught with difficulty - structurally they are very different markets.
But hey, why let the facts in the way of a good rant...
https://www.askaboutmoney.com/threads/average-mortgage-rate-in-finland-1-09-tracker.204031/
Hi Sarenco,
you may have just scuppered your very own argument. Davy's Finnish report specifically states that the default rate of total stock in Finland was 1.2%, in Ireland it is 8.1% (a vast difference). If Irish borrowers were paying 0.81% on their mortgages, the level of default would reduce to that of Finland. This would be because Irish borrowers would be able to afford their monthly mortgage payments at this low interest rate. With regard to capital requirements of Irish banks compared with their Finnish counterparts this situation would be a matter for the Irish Banks and beyond the individual control of Irish Consumers. Maybe the Finnish banks were not as "generous" at throwing money at borrowers at they were in this Country. Maybe the Finnish banks were more prudent at attending to the business of banking. Maybe the Finnish regulator was not asleep on the job, who knows. Maybe jpd, Red Onion and yourself should join the IBDA. But hey, why let facts get in the way of a good rant...
you may have just scuppered your very own argument. Davy's Finnish report specifically states that the default rate of total stock in Finland was 1.2%, in Ireland it is 8.1% (a vast difference). If Irish borrowers were paying 0.81% on their mortgages, the level of default would reduce to that of Finland. This would be because Irish borrowers would be able to afford their monthly mortgage payments at this low interest rate. With regard to capital requirements of Irish banks compared with their Finnish counterparts this situation would be a matter for the Irish Banks and beyond the individual control of Irish Consumers. Maybe the Finnish banks were not as "generous" at throwing money at borrowers at they were in this Country. Maybe the Finnish banks were more prudent at attending to the business of banking. Maybe the Finnish regulator was not asleep on the job, who knows. Maybe jpd, Red Onion and yourself should join the IBDA. But hey, why let facts get in the way of a good rant...
The story that we're all missing here is it's not just Irish customers that are being ripped off. It's right across the Eurozone - the average is 140% higher than the rates available in Finland! There's price gouging everywhere. Customers in Germany are being ripped off with the rates they're being charged - have you seen them? Almost 2% fixed for 20 years!!
Oh wait, Finland have the best capitalised banks in the Eurozone, the lowest default rates and risk asset weightings, along with lower than average LTVs, and a government guarantee scheme, along with an incredibly competitive market, and a mature securitisation environment. If we take a step away from the outliers for a moment, we might have a sensible conversation.
Firstly, are new lending rates here higher than across Europe? Yes. I don't think anyone can deny that. But by how much?
The interest rate statistics only look at 1 thing - the gross interest rate. If we look at an 'average' country like Austria, a variable rate of 1.5% leads to a average cost of 2% over a 5 year term when factoring in the loan arrangement fees, and monthly account charges. (It's typical across Europe for banks to charge you a fee for them to collect your repayment).
Take a 5 year fixed rate with BOI, and 3% cashback, the 5 year rate is 2.4%. And that's fixed.
So from a starting point of double rates, the difference becomes smaller.
Before I'm picked up in it, the reason I used 5 years is because a number of countries in Europe have to quote a 5 year APR so it saves me calculating it.
Secondly, how in the name of all that's holy are AVERAGE new lending rates 3.21% when rates of 3% (and less) are available? Banks obviously don't need to be competitive here if people aren't shopping around for the best rates.
Competition has had an impact here in the last 18 months. UB rate cuts to 2.3%, and this morning KBC rate cuts to as low as 2.5%. This will drive rates lower at AIB and BOI.
Oh wait, Finland have the best capitalised banks in the Eurozone, the lowest default rates and risk asset weightings, along with lower than average LTVs, and a government guarantee scheme, along with an incredibly competitive market, and a mature securitisation environment. If we take a step away from the outliers for a moment, we might have a sensible conversation.
Firstly, are new lending rates here higher than across Europe? Yes. I don't think anyone can deny that. But by how much?
The interest rate statistics only look at 1 thing - the gross interest rate. If we look at an 'average' country like Austria, a variable rate of 1.5% leads to a average cost of 2% over a 5 year term when factoring in the loan arrangement fees, and monthly account charges. (It's typical across Europe for banks to charge you a fee for them to collect your repayment).
Take a 5 year fixed rate with BOI, and 3% cashback, the 5 year rate is 2.4%. And that's fixed.
So from a starting point of double rates, the difference becomes smaller.
Before I'm picked up in it, the reason I used 5 years is because a number of countries in Europe have to quote a 5 year APR so it saves me calculating it.
Secondly, how in the name of all that's holy are AVERAGE new lending rates 3.21% when rates of 3% (and less) are available? Banks obviously don't need to be competitive here if people aren't shopping around for the best rates.
Competition has had an impact here in the last 18 months. UB rate cuts to 2.3%, and this morning KBC rate cuts to as low as 2.5%. This will drive rates lower at AIB and BOI.
Those high default rates exist on tracker portfolios here, where there are low interest rates.
As already pointed out by other posters, this argument is utterly simplistic and doesn't stand up to the most basic level of scrutiny.
Thousands of Irish borrowers defaulted on their home loan obligations even though they were being charged interest at a very low margin (i.e. trackers).
Not when they fly in the face of reality.
Sarenco,
This is what you said on the 14th November 2014 on this forum.
"To be fair, I don't think bankers are citing trackers as the reason for high SVR rates. They are all citing their relatively high cost of funds, which is largely due their weak balance sheets. It's all about the NPLs..."
So what is it, the trackers or not the trackers. Viewers can make up their mind and you can change yours
Sarenco,
This is what you said on the 14th November 2014 on this forum.
"To be fair, I don't think bankers are citing trackers as the reason for high SVR rates. They are all citing their relatively high cost of funds, which is largely due their weak balance sheets. It's all about the NPLs..."
So what is it, the trackers or not the trackers. Viewers can make up their mind and you can change yours
Your post doesn’t make any sense. Nothing in that post from 4 years ago contradicts what Sarenco has said above. Maybe you should read what he said again.
What are you talking about?
I have consistently pointed out on here that our extraordinary default rates, not trackers, are the primary reason why new mortgage rates here are higher here than elsewhere in the Eurozone.
Thankfully competition has driven down the effective cost of borrowing to purchase a home very considerably since 2014.
What are you talking about?
I have consistently pointed out on here that our extraordinary default rates, not trackers, are the primary reason why new mortgage rates here are higher here than elsewhere in the Eurozone.
Thankfully competition has driven down the effective cost of borrowing to purchase a home very considerably since 2014.
Just three banks have a mortgage market share of 80pc, according to the Competition and Consumer Protection Commission, quoting Central Bank data.
In other words, AIB (and its affiliates EBS and Haven), Bank of Ireland and Ulster Bank issue most of the mortgages. Such a situation is anything but competitive and should be a real concern for all of us.
This lack of competition is one of the key issues to be looked at by the Competition and Consumer Protection Commission after it was asked to do so by the Government.
High levels of concentration may lead to "tacit co-ordination" which operates as an impediment to competition, the commission said in a consultation paper on the structure of the mortgage market.
This might help to explain why we have some of the highest variable mortgage rates in the eurozone.
Have a read.
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