Hello,
It will be interesting to see the results of this poll indeed.
Personally, I do think there is capacity for Banks to cut homeloan rates over the next 12 months, but not by a lot. My reasoning is as follows:
- Cost of funds is at "an all time low" and I don't see it increasing over the next 12 months. In fact, with the potential for a further small cut on the ECB, more money being put into circulation by the ECB and confidence bringing other lenders back into the money markets, it could even dip slightly more.
- Competition is returning to the market place, with Banks wanting to grow their marketshare and customer base once again. Some banks are further ahead than others in this regard, but thats where I see competition going. New entrants (including Pepper for example) will all add to the competition and help drive prices down as lenders compete. However, a sizeable new entrant to the Irish market is really needed, to help put pressure on lending rates.
- The Irish economy is on the up, employment is up, consumer confidence is up etc. As such, I would think the risk of default on homeloans is reducing (in overall terms). Lower risk of default must equal more competitive priced loans, again as the Banks compete for marketshare.
- The only significant constraint I can see on homeloan rates reducing in the future, is the future cost of capital for the Banks, keeping in mind that there is upwards pressure on the amount of capital a Bank retains to protect against future losses etc. This pressure will increase over the coming years and hence, it may counteract some of other arguements above for rate reductions, albeit homeloans continue to be the safest form of lending for a Bank dealing with a consumer.
Sorry I should have also mentioned, I've tipped Ulster Bank to drop rates in the next round.... I see them as a "sleeping giant" to some extent and having seen them go through a bit of a roller coaster ride due to questions about thier own future, the future ownership of RBS etc. I think they are now most likely to try and compete to win some market share here in Ireland.