# EBS increases variable rate again



## Knuttell (16 Jul 2010)

> EBS Building Society today announced that it is *to increase its  standard variable mortgage rate by 0.6 points *from  3.23% to 3.83% (3.90% APR) from 1 August.
> 
> EBS says increased cost of funds on international markets means that it  is still charging less to members than it is paying for funding.
> 
> ...



This will only kick start another round of rate increases.
http://www.rte.ie/business/2010/0716/ebs.html


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## gipimann (16 Jul 2010)

That's a total increase of 1.2% since May - ouch!


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## Mrs. Delany (20 Jul 2010)

*Furious*

Sorry if I'm late to the party on this one and there's a huge thread elsewhere but I'm absolutely furious about this increase. I feel like all of us "ordinary" mortgage holders are just a captive audience for the banks, to be bled dry as they please. 

I know that the EU have approved the basic idea of Irish banks moving away from the ECB rates in order to improve their financial standing. However, one of the "promises" of increased european integration was that we'd leave the days of rogue interest rates behind as we'd be pegged to European rates which were historically lower than those that prevailed in Ireland (by the way, in case it isn't already obvious, I'm not an expert so if I'm entirely wrong on all of this - please, no pilloring). Anyway, my prinicipal fury is that not only are the Irish banks essentially going to be able to screw us as they wish, but that there doesn't seem to be any conceivable opening up of the Irish market to a (preferably) non-toxic European bank.

So, my two questions: Why aren't people really angry about the interest rate rises? And why can't I just shift my mortgage in its entirety to one of those nice, "good" German banks? (happily forgetting for a moment here that they were the ones to support the flood of cheap money into Irish banks). Anyway, clearly I'm ranting but I'm serious about the questions. Thanks.


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## marksa (21 Jul 2010)

*long-term mortgage affordability and fixing*



Mrs. Delany said:


> why can't I just shift my mortgage in its entirety to one of those nice, "good" German banks?


 
If you had a mortgage from one of the nice german banks, then it would most likely have been 10 or 20 year fixed rate, at a rate of approx 4-5%. Ireland was one of the few eurozone countries to go both feet into ECB tracker mortgages, most other countries mainly go fixed rate. In Ireland we have a strange attitude to fixing, we think that rates are okay when they are down at 1.5% (ECB+0.50%), but moan like hell when rates start moving upwards as they inevitably do. 

The biggest problem here is that the Irish banks cut their margins far too tight in the boom years such that it did not allow them enough margin to be able to build up reserves of capital for the rainy day. In fact if you cast your mind back to 2008 early 2009, the Irish Banks were arm-twisted into passing on all ECB rate reductions even though it hurt the banks as they had to continue to fund at high term funding rates in the market (not ECB). The non-Irish banks such as Ulster and NIB did not have the same political masters and so were able to hold rates. Have you seen Ulster or NIB increase rates in the last year on mortgages? Don't think so.

If we did more long term fixed rates where the house you purchase is based on long-term affordability of repayments at e.g. 4.5% rather than short-term cheap money then we would not be anything like the mess were are in as a country.


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## NorfBank (21 Jul 2010)

I agree with most of this but not



marksa said:


> The non-Irish banks such as Ulster and NIB did not have the same political masters and so were able to hold rates. Have you seen Ulster or NIB increase rates in the last year on mortgages? Don't think so.



Ulster Bank Variable rate : >80% LTV = *4.00%* APR (non Irish bank) 
AIB Variable rate: >80% LTV = *3.03%*  APR (Irish bank)


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## Quickstraw (21 Jul 2010)

These two recent EBS hikes are scary and there is probably another one coming down the line. I asked about the fixed rate in May and it was 4.7% for three years. Way too high so decided to leave it but am getting jittery about what is going to happen following the next ECB increase.


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## marksa (21 Jul 2010)

NorfBank said:


> I agree with most of this but not
> 
> 
> 
> ...


 
But when did Ulster increase to 4.00%? Or as I believe happened, they did not pass on all ECB cuts late in 2008 early 2009. AIB has been signalled as part of its business (survival) plan submitted to EU as increasing its variable rate by another 0.50% twice, once in August and again in December. This would leave their rates at close to Ulster.


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## NorfBank (21 Jul 2010)

In October 2008, Ulster Bank increased their variable rate to 5.79% while AIB was at around 3%. Ulster Bank have been crucifying their mortgage clients while they sorted out the mess that was First Active, now that is sorted they are still uncompetitive.

Ulster Bank will increase their variable rate - no doubt about that.

Irish bank or not, all mortgage rates will increase and have to increase if they can lend freely again.


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## Mrs. Delany (21 Jul 2010)

marksa said:


> The biggest problem here is that the Irish banks cut their margins far too tight in the boom years such that it did not allow them enough margin to be able to build up reserves of capital for the rainy day.



Are you saying that the difficulties that the Irish banks are experiencing at the moment are the result of them being afraid to raise interest rates in 2008 and 2009? That had they done this they would now have sufficient capital reserves to ride out the devastation of the collapse of the property market? I really, really don't think so.

The current interest rate rises are simply (another) result of regulation failure and banking greed / stupidity /short-termism.

Anyway, 4 to 5 % fixed for 10 years with a German bank sounds absolutely great right now (I've always had an expensive soft spot for the certainty of fixed rates and this, my 7th mortgage year, is my first variable). So, again, why can't I shift my mortgage to a bank in another EU state? If banks can borrow from them, why not consumers?

And, does anyone know if our Regulator has any intention of licensing any international lenders, or indeed if any are interested in operating here? 

Maybe banking is going to be one of the last bastions of Irish independence...


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## Raskolnikov (22 Jul 2010)

Mrs. Delany said:


> Are you saying that the difficulties that the Irish banks are experiencing at the moment are the result of them being afraid to raise interest rates in 2008 and 2009? That had they done this they would now have sufficient capital reserves to ride out the devastation of the collapse of the property market? I really, really don't think so.


The banks have been foolish, but what they're doing is out of necessity, rather than merely gouging customers.

Typically, banks pay out x% on deposits, and lend out those deposits at y%, with y-x being the spread they can keep. The problem, is that the likes of Bank of Ireland, AIB and Permanent TSB have more loans than deposits. To make up for the shortfall in deposits, they have to borrow that money from other European banks. The problem is, that instead of miserly interest rates like 0.1% that we usually receive, European banks look for much more as they're aware our banking system is in the toilet.


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## Shawady (22 Jul 2010)

When we bought our first house in 1998, as far as I can remember our interest rate was between 6-7%.
When the ECB rate starts to go up, I can see variable rates of around 7% being the norm.
I hope people buying now are factoring it in.


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## WinWin (23 Jul 2010)

Mrs. Delany said:


> The current interest rate rises are simply (another) result of regulation failure and banking greed / stupidity /short-termism.



I'm fairly sure 2000-2009 were regulation failure, and banking greed / stupidity.  In 2010 were paying for that failure, greed and stupidity, current rates are still low, if we had SVR of around 5% from 2000-2009 we wouldn't be in this mess.


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