"Pressure mounts on lenders for variable mortgage rate cuts"

[Brendan Burgess]

From the front page of today's Irish Times

Pressure mounts on lenders for variable mortgage rate cuts

The Central Bank has said in a report to the Minister for Finance that it would be advisable for the banks to cut rates to avoid a response from the political system.

In a report to Mr Noonan, the Central Bank is understood to say it would be advisable for the banks to cut standard variable mortgage rates to head off any political response on the issue. Mr Noonan has refused to rule out increasing the bank levy if banks do not reduce interest rates.

The Central Bank report to Mr Noonan is believed to say that, overall, the banks are not making excessive profits on lending when account is taken of their low-yielding tracker mortgages. But it said if there was more competition in the market, the banks would nonetheless have to cut their standard variable mortgage rates.

 

[Brendan Burgess]

But it said if there was more competition in the market, the banks would nonetheless have to cut their standard variable mortgage rates.

This is the key point and I was worried that the Central Bank would say that the overall margins on their book were fair. This is the line which the banks trot out. But the reality is that the margins on one segment of the book are grossly inflated and would fall if a new entrant were to come into the market.

 

[Gerry Canning]

Hmn !

Very good Mr Central Bank {the banks are not making excessive amounts on lending} !

This is word play at its worst because they then add {when account is taken of their low-yielding Tracker mortgages}!

Then why not increase SVR,s to 10% or say 12% and have the SVR save the Banks .

To say more competition would cut rates irritates , was it not Competition that drove the madness in the Market.
..................................................................................................................................................

It remains patently unfair to have SVR holders who clearly understood SVR rates would move in line with Market rates ,carrying the can.
It remains patently obvious the Central Bank is the Bankers friend (as he should be)
It remains patently obvious that SVR holders need to annoy re-annoy and re-annoy their TDs.

 

[jathclare]

I hope the minister has asked the Central Bank if they have recieved any applications from potential Mortgage "competitors", even any expresions of interest? I very much doubt it. The Irish market is tainted still and I very much doubt there are any major players willing to risk a shareholder backlash for a few extra bps above Eurozone norms.

 

[Piggybank]

Jathclare,

I think you are missing the point, the average Irish variable mortgage interest rate is not a few extra bps above eurozone average, it is twice as expensive, so for example, the average eurozone variable mortgage interest rate at the moment is 2.09%. European banks are making profits from issuing mortgages at this rate. Think of what their profit margins would be if they came to Ireland. Other European banks like Danske bank and RBS are withdrawing from Ireland after been bailed out by their respective Central bank and Government for exposing themselves to property markets through reckless lending. Theses are the banks who came to this Country with a business model of high volume low profit yield in relation to mortgages, so as to build market share. They then sold these mortgages on, either by securitisation or by covered bond mechanism. These are the very banks that changed the relatively conservative approach by Irish banks to lending in the first instance.

The Irish Government was forced to bail out the Irish banks who played " follow the leader " with the newly arrived foreign banks. The Irish Government through the Irish Central bank then started to send erroneous data to the ECB about average variable mortgage rate in this Country.The CBI claimed it was much lower than it actually was, as they included rescheduled deals on tracker mortgages in their official figures. The reason this was done, in my opinion, was to prevent competition entering this market, so the Irish Government could quickly rebuild the balance sheets of the broken banks it was forced to acquire and get some return on the Billions it had to invest in the banking system. Brendan Burgess did a good article on this very matter and indeed asked pertinent questions of the Central bank in this regard. The CBI quarterly returns to the ECB are available as a matter of record. Check them out. KBC bank in Belgium are lending at a variable mortgage rate of 2.43% to the Belgium people. their variable mortgage interest rate is much higher in Ireland, yet they are one of the more competitive banks, in terms of mortgage interest rates, in this Country.

 

[jathclare]

Jathclare,

I think you are missing the point, the average Irish variable mortgage interest rate is not a few extra bps above eurozone average, it is twice as expensive, so for example, the average eurozone variable mortgage interest rate at the moment is 2.09%. European banks are making profits from issuing mortgages at this rate. Think of what their profit margins would be if they came to Ireland. Other European banks like Danske bank and RBS are withdrawing from Ireland after been bailed out by their respective Central bank and Government for exposing themselves to property markets through reckless lending. Theses are the banks who came to this Country with a business model of high volume low profit yield in relation to mortgages, so as to build market share. They then sold these mortgages on, either by securitisation or by covered bond mechanism. These are the very banks that changed the relatively conservative approach by Irish banks to lending in the first instance.

The Irish Government was forced to bail out the Irish banks who played " follow the leader " with the newly arrived foreign banks. The Irish Government through the Irish Central bank then started to send erroneous data to the ECB about average variable mortgage rate in this Country.The CBI claimed it was much lower than it actually was, as they included rescheduled deals on tracker mortgages in their official figures. The reason this was done, in my opinion, was to prevent competition entering this market, so the Irish Government could quickly rebuild the balance sheets of the broken banks it was forced to acquire and get some return on the Billions it had to invest in the banking system. Brendan Burgess did a good article on this very matter and indeed asked pertinent questions of the Central bank in this regard. The CBI quarterly returns to the ECB are available as a matter of record. Check them out. KBC bank in Belgium are lending at a variable mortgage rate of 2.43% to the Belgium people. their variable mortgage interest rate is much higher in Ireland, yet they are one of the more competitive banks, in terms of mortgage interest rates, in this Country.

No, we are in agreement 100%, this post is exactly my view.

I am sceptical that there are any banks interested, or in the pipeline to enter the Irish market so all this talk of competition is largely irrelevant and a distraction to other more realistic solutions. We need an Irish solution to an Irish problem and it is becoming apparent that the Central Bank is part of that problem.

 

[Piggybank]

Jathclare,

I believe some citizen has complained to the European Commission Competition Authority about the Irish State's utilization of its dominant position in relation to repressing competition with the Irish Financial Market. That why we are starting to get movement from the Government in this regard.

 

[Eureka101]

How long exactly, will it actually take Danske to 'pull out' of Ireland do we think?

As long as they can keep charging 4.95% with nobody or nothing to stop them I would imagine..

Great little number they have there..

 

[Andy836]

Jathclare,

I think you are missing the point, the average Irish variable mortgage interest rate is not a few extra bps above eurozone average, it is twice as expensive, so for example, the average eurozone variable mortgage interest rate at the moment is 2.09%. European banks are making profits from issuing mortgages at this rate. Think of what their profit margins would be if they came to Ireland. Other European banks like Danske bank and RBS are withdrawing from Ireland after been bailed out by their respective Central bank and Government for exposing themselves to property markets through reckless lending. Theses are the banks who came to this Country with a business model of high volume low profit yield in relation to mortgages, so as to build market share. They then sold these mortgages on, either by securitisation or by covered bond mechanism. These are the very banks that changed the relatively conservative approach by Irish banks to lending in the first instance.

The Irish Government was forced to bail out the Irish banks who played " follow the leader " with the newly arrived foreign banks. The Irish Government through the Irish Central bank then started to send erroneous data to the ECB about average variable mortgage rate in this Country.The CBI claimed it was much lower than it actually was, as they included rescheduled deals on tracker mortgages in their official figures. The reason this was done, in my opinion, was to prevent competition entering this market, so the Irish Government could quickly rebuild the balance sheets of the broken banks it was forced to acquire and get some return on the Billions it had to invest in the banking system. Brendan Burgess did a good article on this very matter and indeed asked pertinent questions of the Central bank in this regard. The CBI quarterly returns to the ECB are available as a matter of record. Check them out. KBC bank in Belgium are lending at a variable mortgage rate of 2.43% to the Belgium people. their variable mortgage interest rate is much higher in Ireland, yet they are one of the more competitive banks, in terms of mortgage interest rates, in this Country.

Can some one provide some links to these "average continental mortgage interest rates"?

My understanding was that large chunks of the larger markets (germany & france) based mortgage rates off their sovereign yields - i.e. fixed rates for 25 years. No?

 

[Brendan Burgess]

Can some one provide some links to these "average continental mortgage interest rates"?

[broken link removed]

 

[Sarenco]

http://www.irishtimes.com/opinion/c...government-in-battle-with-the-banks-1.2214373

Decent article from Cliff Taylor on the tricky politics of this issue.