# Central Bank still pretending mortgage rates for new business are lower than they actually are.



## Brendan Burgess (10 Jun 2016)

They have published their Interest Rates report today

[broken link removed]


*The rate on new floating rate loan agreements*[1]*  for house purchase (which includes renegotiations) was 3.08 per cent* at end-April 2016, representing a decrease of 8 basis points over the month. The equivalent euro rate was 1.86 per cent (Chart 2), which decreased by 3 basis points over the same period.

Only Central Bank statisticians could come up with an average which is lower than all the lowest rate in the population. 




* 
*
There is no equivalent euro rate to this nonsense Irish  rate which includes trackers as new business.

They bury the correct figure in related data tables.
These are New Lending Rates excluding trackers.



So the comparable rate is 3.64% a full 1.78 percentage points about the comparable eurozone rate.


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## Sarenco (10 Jun 2016)

Brendan Burgess said:


> There is no equivalent euro rate to this nonsense Irish rate which includes trackers as new business.



Hi Brendan

As you know, the average Irish rate on new floating rate agreements for house purchases is calculated in accordance with the ECB's MIR methodology, which ensures a harmonised approach across the Eurozone and allows for an "apples to apples" comparison between the average rates charged in different jurisdictions (although it does not allow for lending fees and cash back incentives).

As it happens, virtually all floating rate mortgages on the continent (whether newly originated or renegotiated) are actually trackers.  Why would you exclude renegotiated trackers from your Irish figure but include them in your Eurozone average figure?



Brendan Burgess said:


> So the comparable rate is 3.64% a full 1.78 percentage points about the comparable eurozone rate.



It's really not - that's comparing "apples to oranges".  There is no weighted average standard or LTV variable figure available for the Eurozone as a whole.

The linked paper details the composition of new business for the purposes of the MIR data:-
[broken link removed]


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## Aussie Guy (12 Jun 2016)

Hi Sarenco 


I am moving from Sydney to Ireland with my girlfriend. Doing a bit of budgeting.  I am selling my house here and will be buying a house in Ireland. Not sure what percentage of the cost of the house I will have.  I will go for a variable rate mortgage. What rate should I budget for? In other words, what is the average rate for new customers? I expect to have at least 10% of the value of the house, but I could have up to 50% depending on how we finance it. 

Thanks 

AG


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## Sarenco (12 Jun 2016)

Hi Aussie Guy

Brendan's post here details the best variable rates currently available to new borrowers at various LTVs:-

http://www.askaboutmoney.com/threads/which-is-the-cheapest-lender.197714/


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## Aussie Guy (12 Jun 2016)

Thanks for that, but I would like to know the average rate for a new borrower in Ireland?  Could you tell me that please.


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## Sarenco (12 Jun 2016)

The current average LTV or standard variable rate for a new business PDH loans is set out in the first post.  However, the best rate available to you will depend on your LTV and other individual circumstances. 

Unfortunately, ultra-cheap tracker rates that a large portion of Irish borrowers are still enjoying are no longer offered by Irish lenders.  On the bright side, house prices in Ireland are still a lot cheaper than was the case when trackers were on offer so you will have to borrow less to purchase a similar property.

Hope that helps.


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## Aussie Guy (12 Jun 2016)

Sarenco said:


> The current average LTV or standard variable rate for a new business PDH loans is set out in the first post.



Thank you. I was very confused by the different posts.

So the average rate is 3.08%? It's ok for me to do my calculations based on this figure?


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## Sarenco (12 Jun 2016)

You should do your calculations on the basis of your own specific circumstances and the best rates available to you personally.  The rates that any other cohort of borrowers are paying is not relevant to your individual circumstances.

The ECB's MIR statistics are not designed for individual budgeting purposes and are not presented as such.

The Irish Competition and Consumer Protection Commission has a well-known and very user-friendly mortgage comparison tool that is specifically designed to allow consumers to establish the best available market rates in their circumstances:-

http://compare.consumerhelp.ie/Mortgage


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## Aussie Guy (12 Jun 2016)

Thank you

But I have asked you a very simple question. 

What is the average rate for me as a new home buyer taking out a mortgage?

Can you confirm that it is 3.09%?


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## Gordon Gekko (12 Jun 2016)

Aussie Guy said:


> Thank you
> 
> But I have asked you a very simple question.
> 
> ...



No.

It's 3.64%.

The 3.09% figure is a nonsense.


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## Sarenco (12 Jun 2016)

Aussie Guy said:


> Thank you
> 
> But I have asked you a very simple question.
> 
> ...




You won't pay any average rate - nobody does - you will pay whatever rate is appropriate to your individual circumstances. 

The average new floating rate as calculated in accordance with the harmonised ECB framework was 3.08% at the end of April but that includes restructured loans, which is obviously not relevant to your individual circumstances.


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## Aussie Guy (12 Jun 2016)

Thanks again Sarenco.

We have a saying here in Australia - "Third time lucky". Not sure if you use it.

What is the average rate for the group of people like me who are taking out new mortgages?  I have no idea what frameworks and the ECB and Harmonies have to do with it. 

What do people taking out mortgages today in Ireland pay, on average?


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## Gordon Gekko (12 Jun 2016)

Aussie Guy said:


> Thanks again Sarenco.
> 
> We have a saying here in Australia - "Third time lucky". Not sure if you use it.
> 
> ...



Did you even read my post above?!


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## Sarenco (12 Jun 2016)

Gordon Gekko said:


> Did you even read my post above?!



I'm pretty sure this is a wind up Gordon.


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## Sarenco (12 Jun 2016)

The average new business LTV or standard variable rate at the end of March, as stated above, was 3.64%.  Due to variable rate reductions by a number of Irish lenders in recent months, particularly for new borrowers, this average figure probably stands at around 3.40% today.

However, this average figure is skewed by the fact that one of Ireland's primary mortgage lenders is currently offering variable rate mortgages at deliberately uncompetitive rates to encourage borrowers to opt for fixed rate mortgage products (which historically exhibit much lower default rates).  This strategy has proved very successful for the lender in question and they have captured a significant share of new mortgage business.

Again, no individual borrower pays an average rate - however calculated.  MIR statistics are important in setting monetary policy and for comparing rates across Eurozone member states - but they are not relevant to individual budgeting decisions.

Hopefully that is now clear.


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## Aussie Guy (12 Jun 2016)

Sarenco

Thank you very much for answering my question. 

We might settle in some other Eurozone country instead as that seems a bit on the high side. 

What  is the average rate being paid by people like me in the rest of the Eurozone?  You know, people who are new customers to their banks?


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## Sarenco (12 Jun 2016)

Aussie Guy said:


> What  is the average rate being paid by people like me in the rest of the Eurozone?  You know, people who are new customers to their banks?



No idea - that data isn't available.  

The average new floating rate across the Euro zone (including restructured loans) at the end of April was 1.86%. The comparable rate in Ireland at the end of April was 3.08%.  That's the only comparable data we have at a Euro zone level but unfortunately it is of limited value to any individual borrower - that's not the purpose of the data.

I can also tell you the median rate being charged on all outstanding variable rate loans across the Euro zone (it's actually slightly lower in Ireland than the Euro zone average).  Interesting at a macro level but again of limited interest to an individual borrower.

If you decide to settle in another Euro zone country you should bear in mind that most lenders charge a material fee for borrowing money on top of the agreed interest rate.  Such fees are almost unheard of in Ireland - many lenders in Ireland actually offer cash incentives to borrowers.


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## Gordon Gekko (12 Jun 2016)

Aussie Guy said:


> Sarenco
> 
> Thank you very much for answering my question.
> 
> ...



Have you heard of Google?

There are even alternatives such as Yahoo and Bing for the rebellious types...


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## Aussie Guy (13 Jun 2016)

Sarenco said:


> The average new floating rate across the Euro zone (including restructured loans) at the end of April was 1.86%.



Hi Sarenco

Thank you for this. That seems very low compared to Ireland's figure.

What is a "restructured loan" 

I won't be restructuring any loans. I will simply be taking out a mortgage as a new customer of the bank.


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## Sarenco (13 Jun 2016)

Yes, the Euro zone average figure is a lot lower than the comparable Irish figure. 

The link to the Central Bank paper in the above post details what is included in the new business rate, including what is meant by a restructured loan.

I appreciate that you won't be restructuring a loan which is why I said the data is of limited value to an individual borrower.  That is not the purpose of the data.


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## newirishman (13 Jun 2016)

Aussie Guy said:


> Sarenco
> 
> Thank you very much for answering my question.
> 
> ...



You really decide on where to settle based on an average interest rate for a mortgage for a house purchase?
I've heard and seen many reasons for moving to a certain country/city/place, but the interest rate for a mortgage wasn't on a list I've seen before.


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## Aussie Guy (14 Jun 2016)

Sarenco said:


> Yes, the Euro zone average figure is a lot lower than the comparable Irish figure.
> 
> The link to the Central Bank paper in the above post details what is included in the new business rate, including what is meant by a restructured loan.
> 
> I appreciate that you won't be restructuring a loan which is why I said the data is of limited value to an individual borrower.  That is not the purpose of the data.



I am more confused than ever now.



Sarenco said:


> The average new business LTV or standard variable rate at the end of March, as stated above, was 3.64%.



The average rate in Ireland appears to be 3.64%

I have read that link but I don't understand it. Could you explain to me in simple terms what  a "restructured loan" is?

Why does the ECB quote rates for "restructured loans" and not for the bog standard person like myself applying for a loan as a new customer?


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## Gordon Gekko (14 Jun 2016)

This is a wind-up.

Ignore it, Sarenco.


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