Why are average Irish mortgage variable rates 82% higher than our European neighbours ?

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IdesofMarch

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Propaganda from the Irish banks would have people believe that non performing loans (NPL’s) are the main reason for such extortionate rates being charge to Irish borrowers. This is not the case. Why then are mortgage rates so much higher than our European neighbors ?
 
At an interest rate of 2% it only takes 1 non paying loan in 50 to wipe out the banks income. And they still have to pay their staff.
 
Delboy said:
I'm looking forward to your thesis on why?
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No thesis Delboy; just like other gambling addicts, Irish bankers became addicted to risk taking and leveraging their own products to the maximum, so that any fall in the value of these products had a dramatic effect on the bank's balance sheets. When investors realised that a lot of the complex financial instruments that they had invested in, were in fact worthless, the crash came. Irish banks went bust, the Government intervened and used taxpayers money to bail them out. After been bailed out by the State (Joe public), the banks are now attempting to rebuild their balance sheets by raping both borrowers and savers with outrageous interest rate offerings. You will also notice that health insurance, car insurance have soared in recent times, that is because the firms behind the underwriters of these mortgages and banking products, also have interests in health and car insurance and like the banks, they want to restore their balance sheets. Ultimately Joe public pays for same.
 
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The government, Central Bank and Department of Finance have made it quite clear from their actions they don't give a toss about banking competition. All that matters is the financial stability of domestic banks - partly due to the state involvement in ownership since the bailout.

I have no realistic expectation that if our NPL rate was similar to other EU countries, that our interest rates would be also.
 
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Average rates charged on all outstanding Irish mortgages are actually bang in line with the Eurozone average.

Bear in mind that almost half of all outstanding Irish mortgages are low margin trackers.

That's pretty incredible, IMO, when you consider our extraordinarily high level of NPLs.
 
Sarenco said:
Average rates charged on all outstanding Irish mortgages are actually bang in line with the Eurozone average.

Bear in mind that almost half of all outstanding Irish mortgages are low margin trackers.

That's pretty incredible, IMO, when you consider our extraordinarily high level of NPLs.
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This is a wonderful example of being exactly right and at the same time completely wrong.

Low margin trackers are a sunk cost to the banks. No new trackers are being issued. The issue of repossessing NPLs is a current cost to the banks.
 
Sorry @cremeegg but I really don't understand your post.

I was simply making the point that the thread title is nonsense - average Irish mortgage rates on outdtanding home loans are actually very much in line with average Eurozone rates.

How are low-margin trackers "a sunk cost to the banks"? Performing trackers are not loss making - they're just relatively low-margin loans.

Of course NPLs are an ongoing cost to a lender - I never suggested otherwise.
 
Sarenco’s right...there’s no grand conspiracy; rates for new mortgages are high, but average rates are fine when existing trackers are taken into account.

In addition, it’s hard to repossess a property in Ireland.

And there little prospect of new entrants, probably because it’s difficult to repossess and because political interference hangs over mortgage lending like Damocles’ sword.
 
Gordon Gekko said:
Sarenco’s right...there’s no grand conspiracy; rates for new mortgages are high, but average rates are fine when existing trackers are taken into account.

In addition, it’s hard to repossess a property in Ireland.

And there little prospect of new entrants, probably because it’s difficult to repossess and because political interference hangs over mortgage lending like Damocles’ sword.
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Gordon,

Average variable interest rate for new mortgages in Ireland is 3.48%

Average variable interest rate for new mortgages in the Eurozone is 1.80%
 
IdesofMarch said:
Average variable interest rate for new mortgages in Ireland is 3.48%

Average variable interest rate for new mortgages in the Eurozone is 1.80%
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Nobody is disputing the fact that rates offered on new home loans in Ireland (excluding renegotiations) are significantly higher than the Eurozone average (3.18% versus 1.8%).
https://www.centralbank.ie/docs/def..._retail_interest_rate_statistics.pdf?sfvrsn=4

This statistic exaggerates the differential somewhat as loan arrangement fees (often 1-2% of the sum advanced) are the norm in most Eurozone States, whereas cash backs are commonplace here.

In any event, average rates on all outstanding variable rate mortgages in Ireland are pretty much bang in line with the comparable Eurozone figure, which means your thread title is misleading.
 
Sarenco said:
Nobody is disputing the fact that rates offered on new home loans in Ireland (excluding renegotiations) are significantly higher than the Eurozone average (3.18% versus 1.8%).
https://www.centralbank.ie/docs/def..._retail_interest_rate_statistics.pdf?sfvrsn=4

This statistic exaggerates the differential somewhat as loan arrangement fees (often 1-2% of the sum advanced) are the norm in most Eurozone States, whereas cash backs are commonplace here.

In any event, average rates on all outstanding variable rate mortgages in Ireland are pretty much bang in line with the comparable Eurozone figure, which means your thread title is misleading.
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If I went into a bank in Ireland tomorrow and got a variable interest rate mortgage, the chances are, my mortgage interest rate would be on average 82% higher than my fellow European borrowers of similar circumstances. Why is that?
 
IdesofMarch said:
If I went into a bank in Ireland tomorrow and got a variable interest rate mortgage, the chances are, my mortgage interest rate would be on average 82% higher than my fellow European borrowers of similar circumstances. Why is that?
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As has been stated multiple times, it’s because banks have low cost trackers on their books, there is a lack of competition, and it’s harder to enforce security in Ireland relative to other jurisdictions.
 
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IdesofMarch said:
If I went into a bank in Ireland tomorrow and got a variable interest rate mortgage, the chances are, my mortgage interest rate would be on average 82% higher than my fellow European borrowers of similar circumstances. Why is that?
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First off, your 82% figure is nonsense.

The weighted average rate charged on new home loans (excluding renegotions) is around 43% higher than the equivalent Eurozone figure. If you allow for arrangement fees and cash backs, the effective cost of finance is closer again.

The primary reason why rates on new home loans are higher in Ireland than the Eurozone average is primarily down to our exceptionally high level of non-performing loans. That has a direct impact on the amount of capital that a lender has to reserve for each new loan and on the cost of that capital.

The fact that almost half of their back books are low-margin trackers means that banks cannot spread these costs more evenly across all home loans.

Finally, our failure to deal with NPLs means that new entrants are discouraged, notwithstanding the relatively generous net interest margins currently available to the incumbent banks.
 
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Gordon Gekko said:
As has been stated multiple times, it’s because banks have lost cost trackers on their books, there is a lack of competition, and it’s harder to enforce security in Ireland relative to other jurisdictions.
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Gordon, let me correct you. Tracker mortgage products are not loss making, they are underwritten at the time of contracting, albeit they don’t make the same heafty profits as variable rate mortgages (Irish variable rate mortgages are the most profitable general mortgage product in the Eurozone).

Secondly, difficulty with enforcing mortgages would only make up, at maximum, 15% of the interest rate differential between Eurozone variable rate mortgages and Irish variable rate mortgages.

Finally, lack of competition, in this regard you could be correct, as Irish banks are allowed pillage from their own citizens unabated. This might suit Government, given their current stake in the banks.
 
Sarenco said:
First off, your 82% figure is nonsense.

The weighted average rate charged on new home loans (excluding renegotions) is around 43% higher than the equivalent Eurozone figure. If you allow for arrangement fees and cash backs, the effective cost of finance is closer again.

The primary reason why rates on new home loans are higher in Ireland than the Eurozone average is primarily down to our exceptionally high level of non-performing loans. That has a direct impact on the amount of capital that a lender has to reserve for each new loan and on the cost of that capital.

The fact that almost half of their back books are low-margin trackers means that banks cannot spread these costs more evenly across all home loans.

Finally, our failure to deal with NPLs means that new entrants are discouraged, notwithstanding the relatively generous net interest margins currently available to the incumbent banks.
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Can you provide me with some statistical evidence to back up your claims ?
 
IdesofMarch said:
Gordon, let me correct you. Tracker mortgage products are not loss making

Secondly, difficulty with enforcing mortgages would only make up, at maximum, 15% of the interest rate differential between Eurozone variable rate mortgages and Irish variable rate mortgages
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With regard to your first point, I never said that they are “loss making”; I said that they’re “low cost”. Please do not misrepresent what I said.

With regard to your second point, 76.456% of all statistics are made-up; where exactly are you getting your 15% figure from?
 
Gordon Gekko said:
As has been stated multiple times, it’s because banks have lost cost trackers on their books, there is a lack of competition, and it’s harder to enforce security in Ireland relative to other jurisdictions.
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I believe you said “lost cost trackers” you appear to be misrepresenting you own words!

All statistics are made up. That is the nature of statistics.

“Facts are stubborn, statistics are more pliable.”

Mark Twain

Fact is, Irish borrowers are being ripped off by Irish banks, just look at the tracker mortgage scandal. STUBBORN FACT and continue to be.
 
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IdesofMarch said:
I believe you said “lost cost trackers” you appear to be misrepresenting you own words!

All statistics are made up. That is the nature of statistics.

“Facts are stubborn, statistics are more pliable.”

Mark Twain
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Clearly it was a typo...”lost cost” vs “low cost”.
 
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