KBC rates in Belgium vs KBC rates in Ireland

Brendan Burgess

Brendan Burgess

Founder
Messages
52,328
Brian Hayes has been tweeting about rates in Belgium
https://twitter.com/hashtag/comparemortgagerates?src=hash

KBC in Ireland charges 4.3% to existing customers and they can do nothing about it other than switch lender.

They charge new customers variable rates of 3.65% for up to 90% LTV

Here are the rates for a 20 year loan from KBC in Belgium. They don't seem to price loans based on LTV


upload_2015-9-14_10-33-39.png



1/1 means that the variable rate is 2.46% and it will be reviewed every year. The maximum it car rise by over the 20 years is 3%.

5/5 means that the rate is fixed at 2.52% for the next 5 years, at which stage it will be reviewed. The maximum it can increase to over the live of the loan is 4.52%.

Fixed means fixed. A Belgian customer can fix for 20 years at 3.15% . The longest fixed rate available in Ireland is for 10 years from Bank of Ireland at 4.2%

Brendan
 
Brendan Burgess said:
KBC in Ireland charges 4.3% to existing customers and they can do nothing about it other than switch lender.
Click to expand...

I am aware of several instances where KBC are charging 4.5% to existing svr customers and the borrowers can't switch because of negative equity and/or arrears.
 
Agreed, but they could bring the rate down to 4.3% by opening a current account with KBC, which they should do.

Brendan
 
If they could ! Do banks not run ICB checks on people applying for current accounts ?
 
demoivre said:
If they could ! Do banks not run ICB checks on people applying for current accounts ?
Click to expand...

Hi demoivre

I don't know. I would imagine that if you have a mortgage with KBC, they will offer you a current account. They might not give you an overdraft, but they should give you a current account.

If they apply and are refused, let us know.

Brendan
 
Re Brian Hayes, tweeting rates available in other countries is disingenuous if he doesn't actually explain why there are differences.

KBC has about 14bn in Irish loan assets - 50% of which are impaired. This compares with its Belgian loan book of 86bn which only has 4.1% of assets classed as impaired.

He was also referencing ING - ING has 860 billion in assets. Larger than all the Irish banks put together. At Y/E 2014 it had 283bn in mortgage assets alone but only 1.8bn in associated provisions (i.e. a 0.6% provision rate). It has a retail non-performing loan rate of 3.9% in the Netherlands and 3.1% in Belgium and a group NPL rate of only 3%.

There are two issues which his government failed to resolve:
1. The margin drain on the Banks from their tracker mortgage books.
2. The inability for Banks to foreclose on defaulted borrowers.

1. Arguments saying trackers are now breakeven on a net income perspective are also disingenuous as this doesn't cover the cost of managing these assets and provides little to no contribution to profitability or provisions.

2. The easiest way to look at the foreclosure side, is to look at two key assumptions used by S&P in their RMBS ratings methodology. These highlight the problems Irish Banks face [data available from S&P ratings methodology website]:

Ireland
Costs of Foreclosure - 7%
Loss Severity - 70%
Time to sell asset (repossessed property) from day of default - 42 months

Dutch
Costs of Foreclosure - 5%
Loss Severity - 36%
Time to sell asset (repossessed property) from day of default - 18 months

UK
Costs of Foreclosure - 4%
Loss Severity - 50%
Time to sell asset (repossessed property) from day of default - 18 months

It costs Irish Banks more to foreclosure, they lose more when they foreclose and it takes twice as long to foreclose.
 
Hi Andy

I agree with the bulk of your post.

However, I would point out that BOI's NIM on its tracker book is now 23bps, which would comfortably cover the cost of servicing the performing tracker loan book and would leave a modest net margin.

In any event, even if trackers were loss making what could the government have done? They are enforceable contracts at the end of the day.

I certainly agree that the high level of NPLs and the high cost of enforcing security is the primary reason for the high cost of credit in Ireland.
 
Hi Sarenco,
Typically servicer fees for loan books are higher than that c. 35 to 50bps for an rmbs. Last deal I looked at it was 100bps but that was for a clo.

Add on the increased costs of managing the defaulted borrowers and I'd say we're still a small distance from breaking even on an op margin basis. Maybe another 25-35bps but even at that they're still not providing a meaningful return on capital.

How can they be dealt with? They shouldve had nama or the ecb buy them when the banks were being recapitalized (spread the cost of the trackers to everyone in society rather than just those on SVRs). Could still pursue this maybe? Thoughts
 
Hi Andy

The fees charged by a loan servicing agent on a securitised loan transaction is not a good proxy for what it costs an originating lender to service a performing loan book (I'm only referring to performing loans). The cost of servicing a performing book of mortgages would be materially less than 20bps.

If performing trackers were actually loss making for lenders then you would expect them to offer some discount for early redemptions - they don't because they are no longer loss making.

Even if performing trackers were still loss making, I don't really see what the point would be of transferring these loans from the balance sheets of State owned banks to another State owned entity. Obviously, the government does not control the ECB.

In any event, none of the above detracts from the central point that the principal reason the cost of credit in Ireland is high relative to our European peers is the high level of NPLs and the high cost of enforcing security here. The later is almost entirely within the control of the government.
 
Andy836 said:
2. The easiest way to look at the foreclosure side, is to look at two key assumptions used by S&P in their RMBS ratings methodology. These highlight the problems Irish Banks face [data available from S&P ratings methodology website]...

It costs Irish Banks more to foreclosure, they lose more when they foreclose and it takes twice as long to foreclose.
Click to expand...

We keep hearing about the cost and difficulty of foreclosure in Ireland, but it is never actually quantified, nor is it set in proportion against the supernormal margins that a bank such as KBC is making off the backs of trapped customers. What is the relationship? Are these amounts the same? Are they double? Are they half? A tenth?

Raising this issue without making clear the actual loss to the lenders is muddying the waters for the benefit of banks -- especially those like KBC who are thumbing their noses at everyone. I was disappointed to hear Brendan raise it yesterday in an otherwise excellent discussion with Sean O'Rourke.
 
keepon said:
I was disappointed to hear Brendan raise it yesterday in an otherwise excellent discussion with Sean O'Rourke.
Click to expand...

Oops. What did I get wrong yesterday? I haven't listened back to it, so I don't know what I said.

But to be fair to me, I was told I would be on for 5 minutes, and I have to try to get a lot of key points across, so I can't put in all the caveats and clarifications.
 
As per keepon.

Banks here make 2% more on performing mortgages than elsewhere.

So each year on k100 they get (extra) k2 .
So after 10 years they have (cushion) of k20 extra funds.

So they have a lot of (extra) funds embedded in their systems to compensate for unquantified losses.

Can someone analyse how this k20 equates back to perceived repo costs etc?

Looks like a lot of cover for bad debt?
 
Sarenco,

The monetary differential between the cost of credit in Ireland with respect to the rest of Europe, far exceed the costs associated with the points raised in your last post. You can do the math, there is profiteering going on in this Country by Irish Banks in their treatment of variable rate and indeed fixed rate mortgage holders, as well as depositors. This profiteering has undoubtably got the backing of Government, who wish to make a return on their bailout of the banks during the financial crisis. This is a fact that even Andy cannot deny.
 
Andy836,

Any idea on the length of time to repossess a property in France ?
 
Well, if there's profiteering going on can you explain why the banks are making minimal profits?

Andy's post above quantifies the extent of impairment, the cost of foreclosure and the severity of loss on enforcement of Irish lenders compared to European peers. Not sure what additional detail people are looking for.
 
Sarenco,

Inefficiently run institutions with their profit margins been reduced substantially by paying out vast amounts to supplement gold plated pensions of senior and executive managers ( or should I say mis-managers )
 
Last edited by a moderator:
Andy836,

Why not choose a European Country where the length of time to repossess is actually longer than in Ireland, or are we all for slanted one sided postings
 
Last edited by a moderator:
Sarenco,

Do the math on the subject you are posting about.
 
You must log in or register to reply here.
Back
Top