Key Post Briefing: Irish mortgage rates are almost 2% higher than the Eurozone average!

Firstly, well done Brendan on highlighting the high mortgage rates, in Ireland, to the media. I think a lot of people were oblivious to the fact.

Brendan Burgess said:
The following foreign banks which don't lend in Ireland, obviously see Ireland as a source of cheap deposits:
  • Nationwide UK (Ireland)
  • Leeds Building Society Ireland
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Their respective origins are clear but their ongoing reason for a presence in Ireland is not cheap deposits.

Nationwide UK (Ireland) pay a lot higher deposit rates than Nationwide UK. Nationwide UK established an Irish presence, at the hight of the crisis, to gain access to unlimited cheap money from the ECB. That explained their existence for years. Today, Nationwide UK no longer need the ECB money, they have a very low loans-to-deposits ratio, they are more than fully funded via deposits only. So why are they still here? It is either a currency hedge, contingency central bank funding hedge or a deposit diversification strategy. Alternatively, they might have a medium term objective to expand their Irish offering.

Leeds Building Society entered the Irish market offering mortgages here. Leeds Building Society Ireland have long since exited the mortgage market but did not sell their mortgages. They now offer just one deposit product. I think their strategy is simply to cover their euro mortgage exposure with euro deposits. They must figure that this is a cheaper route than selling the mortgages at a discount. They are a wind down operation.

Brendan Burgess said:
What are the typical rates being paid by Irish mortgage lenders for deposits?
The Central Banks says that the average rate is 0.65%
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Laziness is a huge factor here. A minority are proactive with switching savings products.

0.65% is the average rate for deposits with "agreed maturities". This seems low as term deposits, not instant access deposits, except with RaboDirect, all pay higher rates.
 
Charlie Weston returns to the topic today

Lenders are accused of making €1bn super profits on mortgages

Consumer advocate Brendan Burgess has accused the banks of having some of the highest profit margins on home-loan lending in the eurozone.

"They are gouging the variable rate customers - whether they are new or existing customers," he said.

"They are making super profits of €1bn every year from this overcharging," Mr Burgess of Askaboutmoney.com said.

He claims the banks are using the high lending costs to make up for losses on trackers and mortgages that are in default.

His comments came as a new report from stockbroking firm Davy showed banks are making huge profits on lending. Analyst Emer Lang wrote in a new report on AIB and [broken link removed]: "Increased new lending at higher margins is helping; new loans are typically commanding spreads of 300bps (basis points) over banks' blended average funding costs."

This means that it costs banks 1.5pc to get the funds and this money is then lent out for 4.5pc as mortgages. This works out at a gross profit of €300 a month on every €200,000 lent out.
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Well done Brendan. This is a consumer issue well worthy of highlighting.

300bps profit per annum over the lifetime of a morgtage is extortionate.

I don't buy the argument about repossessions, etc in respect of new business. Lending controls have never been stricter and in terms of incomes and valuations we are in a much more realistic place than 10 years ago.

I don't buy the argument that low margin trackers are pushing up variable rates either. In a healthy market you won't be allowed make supernormal profits to subsidise losses from elsewhere.

I think we have a bit of a cartel going on with mortgage lending from the remaining banks. The motives behind anything that discourages new entrants (particularly from the Central Bank) have to be looked upon as deeply suspicious. If anything, the central bank should be responsible for implementing measures to attract new entrants i.e. addressing inefficiencies and anomalies that scare off potential new entrants.
 
Der Kaiser;

You are right again on your comments.

Anything touched by our Central Bank seems to have {protect our Banks at any cost} written on it.

Central Bank is not capable of being trusted , their history of not policing Banking is very poor. Now they pretend they are protecting consumers!
The sad part is they hold the way things are presented!
 
Banks (or any businesses) have to try to make up for a loss making section, the money has to come from somewhere - it makes sense it's SVR owners, deposit rates, and current account fees. If it's not bank customers then, as we've discovered, it's got to be taxpayers.

Also it's unrealistic to expect too much foreign competition, Ireland is currently a small mortgage market, our property collapse is internationally well known, some of the candidates were burned last time round and will never come back.

The foreign banks who came in the bubble were seeing a market of 100,000 mortgages a year- today it's around 10,000. It's not cheap to enter a new market and if it's only for a couple thousand mortgages - why bother.
 
What happened to the free market that we were supposed to have in the EU? I should be able to go to any bank in the EU at this stage and look for a mortgage back here.

Would it be too much for the mandarins in Brussels to concentrate on areas like that rather than protecting bogs or creating false 'competition' at an increased price to the consumer (I'm talking about the Premiership here and the EU forcing it to sell some packages to Sky's competitors)
 
Delboy said:
What happened to the free market that we were supposed to have in the EU? I should be able to go to any bank in the EU at this stage and look for a mortgage back here.
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And you absolutely can!!! But you will not find a bank willing to do so, because they are not interested in doing such business. And you can force banks or anyone else for that matter to get into a business they have no interest in.
 
Delboy said:
wow...20 years for 3.56%
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That's about the same rate I was quoted by Commerzbank (Germany), 20 years fixed. When I asked for a similar quote in Ireland, they told me that I would never be able to afford the interest rates they would charge for such a long period, so I cut the conversation.
 
From Sean Whelan on Twitter ...

ECB cut refi 10 bp in June, average interest charged by Irish banks on consumer loans went up 114bp to 7.54% vs EZ average 4.56% -13bp. CBI
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In other words, the ECB reduced their base rate by 0.10%, Eurozone consumer loan rates went down, on average, by 0.13% which Irish consumer loan rates went up by 1.14%.
 
Delboy said:
What happened to the free market that we were supposed to have in the EU? I should be able to go to any bank in the EU at this stage and look for a mortgage back here.

Would it be too much for the mandarins in Brussels to concentrate on areas like that rather than protecting bogs or creating false 'competition' at an increased price to the consumer (I'm talking about the Premiership here and the EU forcing it to sell some packages to Sky's competitors)
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There is a free market. The problem is that it's too complicated for say a bank in Austria to deal with the legalities and languages of an Irish market.

What you will find though is cross border mortgage. For example, UK banks will loan to UK residents for purchases in Ireland, France, Spain and Portugal. German banks will loan on purchases in Spain and Poland.

Where a certain country has a border/tie with another country, and where it is common for citizens to buy holiday homes in certain countries, you will find more of a market for cross border mortgages.

Speaking about SKY, we have a sky box, illegally, from the UK, we can also get a UK or Irish subscription for the UK or Irish channels as long as we pretend it's for an Irish or UK address (we've the sateillite dish for the free to air UK channels), but this we are legally not allowed to have. Where I am and presumably all over Europe there are companies/people who will organise the whole lot for you.

I don't understand the ins and out of it and the free market. Also we cannot get some of the podcasts on RTE due to something about our IPT address being on the continent. UK sky customers who go to Spain bring their sky boxes with them.
 
Brilliant work on this Brendan. Somehow I missed it when I posted a rather less informed complaint on this topic a couple of days back.

It's a pity that the revered suits in The Irish Times, Sunday Times, RTE Business and so many others in the corporate media, who should be all over this blatant usury, have ignored the scandal. I suppose they are still using the press releases in which huge variable rate margins have been normalised by vague and simplistic sound bites referring to trackers, when there actually is no rational justification for this cross-subsidy.
 
I wonder what else Burgess could uncover if he could dig deep enough.

You'd imagine that the boys in RTE and the Sindo etc, with all their researchers, expertise, and investigative finance would be the ones to be breaking these types of story.
 
Bronte said:
You'd imagine that the boys in RTE and the Sindo etc, with all their researchers, expertise, and investigative finance would be the ones to be breaking these types of story.
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The problem is their research and investigative effort in many cases extends little further than checking what PR is in their inbox. For illustration, just listen to Morning Ireland...
 
Article in the Irish Examinder this morning regarding a Goodbody report, saying that Mortgage Interest rates are close to their lowest level for 40 years?

http://www.irishexaminer.com/busine...tgages-this-year-as-lending-rises-289356.html

"With the average mortgage interest rate at 4.5% — close to its lowest level in 40 years — analysts at Davy Stockbrokers warned that interest rate increases of 2 percentage points could add up to additional payments of almost €520 per month for borrowers in areas such as south county Dublin, where prices have reached an average of €441,000 for a three-bed semi-detached house."

Lies, Damn Lies & Statistics.
 
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