It's Official, Ireland's Great Mortgage Rate Rip Off

I don't see how that article references the ECB.

No one is disputing that Ireland's mortgage rates are among the highest in the Euro area. And why is that? One of the main reason is that banks have greater difficulties in Ireland in re-possessing homes/houses from delinquent borrowers. The extra costs associated with this (loss of interest, legal fees, etc) have to be borne by the rest of the borrowers.

Very few in Ireland are prepared to see this change, so in the meantime the rest of us just have to cough up the higher rates. If banking was that profitable here, then there is no doubt that foreign banks would be rushing in to grab some of the profit but as they aren't, bar one or two, that implies that the banking industry is not creaming it as some say.
 
I don't see how that article references the ECB.

No one is disputing that Ireland's mortgage rates are among the highest in the Euro area. And why is that? One of the main reason is that banks have greater difficulties in Ireland in re-possessing homes/houses from delinquent borrowers. The extra costs associated with this (loss of interest, legal fees, etc) have to be borne by the rest of the borrowers.

Very few in Ireland are prepared to see this change, so in the meantime the rest of us just have to cough up the higher rates. If banking was that profitable here, then there is no doubt that foreign banks would be rushing in to grab some of the profit but as they aren't, bar one or two, that implies that the banking industry is not creaming it as some say.

jpd,firstly,the Central Bank of Ireland is a member of the ECB. The same type arguments trundled out by other posters on this forum do increase the costs for banks here, this no one can deny. However it does not make up for the differential between Irish Mortgage rates and that of our European partners.
 
The rates charged on all outstanding mortgages in Ireland are not high when compared to other Eurozone countries - bear in mind that almost half of all outstanding mortgages by value are cheap trackers.

However, it's certainly true that new home loan rates are significantly higher here than the Eurozone average. That is primarily because our level of non-performing mortgages is off the charts and this impacts the amount of capital that banks have to set aside to absorb anticipated defaults on new home loans.

Also, the MIR statistics don't take account of loan arrangement fees (which are standard on the continent) or cash-back deals (which are a significant feature of our market). In other words, the MIR statistics exaggerate the difference somewhat between the effective borrowing costs.
 
Loan Arrangement fees are blatantly ignored, plus some other details.

One example from an Austrian Bank, bankaustria.at - this is a typical example for Austria, all the fees would be prettythe same across the banks.
*In Addition* to the below, you have to expect 10-12% of the purchase price for legal fees.
Also, LTV usually 70-75% Max!
Example numbers when financing 200K over 25 years - 70% LTV, ie property price 285K roughly, plus 30K legal fees = 315K required,

Loan period: 25 Years
Interest rate: 1,5 % p.a. variable - 2.0% APR
Credit arrangement fees: EUR 4.000 (2% of loan amount)
Valuation Fee: EUR 1.250,- (0.625% of loan amount)
Costs of land registry entry: EUR 2.880,- (1.44% of loan amount)
Quarterly Account fees: EUR 16,20

Monthly repayment rate: EUR 807,33
Total amount paid out: EUR 191.814,30 (200k minus above costs)
Total repayment amount : EUR 242.139,22

Given total costs of 315K, you need to have around 125K *cash* for a property worth 285K

Compare this to Ireland:
Legal costs are usually say around 2000 Euro? May be 2500?
80% LTV not a problem, 90% if FTB.

So property costs 285K, plus 2.5K legal costs = 287,500
say 80% LTV = 57,500 Euro cash required
90% LV = 28,750 Euro cash required,
 
*In Addition* to the below, you have to expect 10-12% of the purchase price for legal fees.

So what? This is about the interest rates not the other costs. Unless you are arguing that the bank's interest charges are lower, because the borrower has to pay the bank's legal fees? If this is the case, they are unlikely to be 10% to 12% of the purchase price.

Brendan
 
So what? This is about the interest rates not the other costs.
From a borrower's perspective, it doesn't really matter whether a lender classifies a charge as an interest payment or a fee - all a borrower really cares about is the overall cost of credit.

The MIR statistics are not really designed to compare the effective cost of borrowing money to purchase a home accross different countries.
 
I am a member of the GAA, if you want to quote anything I say please feel free to attribute it to the GAA.


llgon, I will explain it for you as it appears you have not got the grasp of what a Member State Central Bank is, with regard to the overall ECB (European Central Bank). You see llgon, the Central Bank of Ireland is part of the ECB, each Member State Central Bank forms the ECB and can make comments on mortgage rates in their respective Country as they, more than any other Member State Central Bank, have access to up to date data on mortgage rates in their respective Country. Do you understand this or have I lost you. Your analogy with regard to the GAA is absurd, but maybe that your mindset. Think instead of the Central Committee of the GAA making a comment on the GAA, do you understand now, God bless you. I hope jpd gets this as well, bless him. If the outlined concept is to complicated for you, ask a grown up for help.
 
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From a borrower's perspective, it doesn't really matter whether a lender classifies a charge as an interest payment or a fee

Agree fully with that.

But is the Austrian Bank in question charging the customer 12% legal fees?

Or is it the legal profession?

Brendan
 
But is the Austrian Bank in question charging the customer 12% legal fees?
I really don't know.

But the credit arrangement and quarterly fees wouldn't be reflected in the headline interest rate and they are not insignificant. In contrast, most Irish lenders now have cash-back offers of some sort. So the MIR statistics are an unreliable guide to the effective cost of borrowing for home purchases.
 
Loan Arrangement fees are blatantly ignored, plus some other details.

One example from an Austrian Bank, bankaustria.at - this is a typical example for Austria, all the fees would be prettythe same across the banks.
*In Addition* to the below, you have to expect 10-12% of the purchase price for legal fees.
Also, LTV usually 70-75% Max!
Example numbers when financing 200K over 25 years - 70% LTV, ie property price 285K roughly, plus 30K legal fees = 315K required,

Loan period: 25 Years
Interest rate: 1,5 % p.a. variable - 2.0% APR
Credit arrangement fees: EUR 4.000 (2% of loan amount)
Valuation Fee: EUR 1.250,- (0.625% of loan amount)
Costs of land registry entry: EUR 2.880,- (1.44% of loan amount)
Quarterly Account fees: EUR 16,20

Monthly repayment rate: EUR 807,33
Total amount paid out: EUR 191.814,30 (200k minus above costs)
Total repayment amount : EUR 242.139,22

Given total costs of 315K, you need to have around 125K *cash* for a property worth 285K

Compare this to Ireland:
Legal costs are usually say around 2000 Euro? May be 2500?
80% LTV not a problem, 90% if FTB.

So property costs 285K, plus 2.5K legal costs = 287,500
say 80% LTV = 57,500 Euro cash required
90% LV = 28,750 Euro cash required,

I suspect you need a lot more than 125K cask in Austria They will not lend to pay your tax /Stamp duty I would say the max you can borrow is 60% of house cost so you would need to have 40% in cash to get there max loan ,
Nice to see people for a change comparing Ireland to other EU Countries to often we see people looking at the UK and USA which is a waste of time ,

Possibly the biggest reason Most people and Banks finish up in trouble with Mortgage holders is because of the changes Made to the PRSI system back around 1984/85 when the government done away with what is standard in EU Countries where Mortgage rates are low to this day,

back around 1984/85 I myself was on layoff around that time for four or five months having paid prsi since 1969 I received around 70% of my gross wages Mortgage interest rates were very high I had no problem paying my Mortgage until
I was back working again ,

In the estate I lived in a lot of my Neighbours lost there jobs when a factory closed a few years after taking out there Mortgage because of the pay related social Insurance system back then they were all able to keep there mortgage paid
until the found other work,

I think Brendan should invite Members of his site Who work or have worked in other EU to explain how there social insurance system works I suspect He will find the answer to our high Mortgage rates,

just to give you an example back around 1990 I was on an exchange of employee to one of our German Suppliers when they had a down turn and had to put people on lay off the German system back then Employers paid the Employee on lay off there net Wages and claimed it back out of the Social Insurance fund to the best of my knowledge around 30% was ring fenced for each employee,

People in there first job who had not enough ring fenced were not put on lay off

I think things may not be as good now in some employments because the payout is less full wages ,
 
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llgon, I will explain it for you as it appears you have not got the grasp of what a Member State Central Bank is, with regard to the overall ECB (European Central Bank). You see llgon, the Central Bank of Ireland is part of the ECB, each Member State Central Bank forms the ECB and can make comments on mortgage rates in their respective Country as they, more than any other Member State Central Bank, have access to up to date data on mortgage rates in their respective Country. Do you understand this or have I lost you. Your analogy with regard to the GAA is absurd, but maybe that your mindset. Think instead of the Central Committee of the GAA making a comment on the GAA, do you understand now, God bless you. I hope jpd gets this as well, bless him. If the outlined concept is to complicated for you, ask a grown up for help.

Thanks Ides, I understand that the Irish Central Bank is not the ECB. Nor is it the Central Committee or equivalent of the ECB as your post implies. It is also quite clear that there is no mention by them of a mortgage rip-off as your initial post indicates. The post and thread title are obviously completely misleading but I'm not surprised that you can't see this.
 
Agree fully with that.

But is the Austrian Bank in question charging the customer 12% legal fees?

Or is it the legal profession?

Brendan
Or is it they are not giving you a loan to pay your legal fees,:oops:
The easy bit is the reading and having a bun fight and winning it and not understand a word of what you have read,
 
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This has been the case for quite a number of years and unfortunately it doesnt look it will be changing any time soon as the government which Michael McGraths FF are propping up have no interest in doing anything about this or indeed have the central bank, that same central bank thats in the ECB but has done nothing to protect consumers stuck on these rates. The repossession regime in this country badly needs overhauling too as certain people who say havent at least tried to come to an arrangement or those that are in a position that is simply hopeless should be subject to repossession but arent. Neither is our situation helped by the everything for nothing brigade, eg SF, PBP and parties like them who dont help us by insisting nobody should be repossessed. Just to clarify i do like to see genuine people helped by coming to arrangements but not the above cases or as i suspect the cases of strategic default, people who can pay but wont.
 
For the avoidance of doubt, neither the ECB nor the CBI has said that Irish mortgage rates are a rip off.

The OP is simply untrue.
 
Sarenco, the ECB and the CBI would never use language like that as you know only to well, but thanks so very much for pointing this out. (I know a person who has Asperger's syndrome and takes everything that is said literally) The person who actually used the language "rip off" was none other than Michael McGrath TD (shadow spokesman on Finance for FF) but so what. It walks like a duck, it sounds like a duck, wait a minute, it is a duck!
 
The pronouncements of a publicity-seeking opposition politician with a price-fixing agenda are not an official statement of anything.

Your OP is simply untrue - even with your edits.
 
The pronouncements of a publicity-seeking opposition politician with a price-fixing agenda are not an official statement of anything.

Your OP is simply untrue - even with your edits.

Sarenco,

Just for clarification purposes, are you stating the the Central Bank of Ireland has not said that the average new mortgage rate for borrowers in Ireland is 3.21%, the highest in the Euro area, while the mean average across the rest of the EU is 1.83%. Is this correct? If this is not a RIP OFF for Irish consumers I do not know what is.
 
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