Brendan Burgess
Founder
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Must be one of the few given the lack of interest in the topic!! (excuse the pun).Am I the only one annoyed by high mortgage rates in Ireland?
I am very annoyed by these high rates, and I don't even have an SVR mortgage.
But what astonishes me is that there isn't widespread protests about them - outside the Dáil, outside the Central Bank, outside the banks.
His take on variable rates (presumably referencing the recent Danske case):And, even at 3.25 percentage points above the ECB rate, you still have, by historical standards, a very cheap mortgage in the Irish market.
I am aware, of course, that the courts have recently thrown back to the financial ombudsman a case in which a lender raised rates on a variable loan at a time when ECB rates had not risen. It remains to be seen what happens there.
Personally, I am not sure that a bank can be held to have acted unreasonably if a variable-rate contract allows it to adjust rates and if its financial position requires it to increase the margin it is charging on such loans; but we will see what happens.
I am aware, of course, that the courts have recently thrown back to the financial ombudsman a case in which a lender raised rates on a variable loan at a time when ECB rates had not risen. It remains to be seen what happens there.
Personally, I am not sure that a bank can be held to have acted unreasonably if a variable-rate contract allows it to adjust rates and if its financial position requires it to increase the margin it is charging on such loans; but we will see what happens.
This in my view should be a far more serious concern than the actual rates now being charged. The loan contract includes a pricing mechanism that permits the lender to vary the rate charged at its own whim. I find it difficult to believe that such contracts have never been challenged as any contract which gives such power to one party to amend a key condition cannot be fair.Along with the rates, is there not an issue of fairness with SVR mortgages. The bank holds all the power and the borrower is subject to terms that dictate they must pay what ever rate the bank decides. Is the bank free to decide that the rate will be 5%, 50%, 500%? The bank would never sign up to a load where the borrower set the rate so why must the borrower put up with such one-sided terms?
It's all about the NPLs...
As pointed about by other posters, the primary reason mortgage rates are so high in Ireland is the high proportion of non-performing loans on the bank's books. It is meaningless to compare mortgage rates across European jurisdictions unless you also compare the rate of non-performing loans.
Take a look at the attached table from the World Bank. You can see that most Eurozone banks (outside of the PIIGS) had non-performing loans as a percentage of total loans between 2009-13 in the range of 3-4% whereas the percentage of NPLs in Irish banks was over 24%. If the banks cannot repossess without huge difficulties (due to cultural, legal or regulatory hurdles) then the direct result is a higher cost of credit. We can't have it both ways folks...
http://data.worldbank.org/indicator/FB.AST.NPER.ZS
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