Euro area mortgage rates are catching up with Ireland's

With the Finance Ireland increase, why are the pillar banks static on rates after ECB increases?

All the brokers are saying increases are coming but nothing happening yet?
 
Also, bear in mind that approximately 30% of all outstanding mortgages are still trackers, which automatically increase with each ECB increase.

So that helps Irish banks to increase their profit margins without increasing new business rates.

Also, they are no longer paying out interest to the ECB for using their overnight deposit facility - they are actually receiving a positive rate on those funds of 0.75%.

For as long as Irish banks can attract deposits while offering low/zero interest, I don’t see any particular reason why they should increase their new business mortgage rates.
 
August 2022 rates are now available. Euro area at 2.44%, Ireland at 2.57. This is new lending for house purchase, over 1 and up to 5 years.


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For new business, one to five year fixed, Irish rates (2.57%) are now lower than Germany (2.78%), Austria (2.63%), Italy (2.62%) and Belgium (2.82%).


Ireland is still above the euro area average of 2.44%, but that seems to be driven weighted by France which is still at 1.58%.


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The phenomenon is mainly a result of what’s called ‘deposit beta’ in industry jargon.

Basically, the banks are making out like bandits, given that they’re still only offering deposit rates of zero or close to zero for anything meaningful.

With some Irish banks’ deposit to loan percentages at 40-50%, why would they increase mortgage rates when it’s cover for not increasing deposit rates?
 
Gordon Gekko said:
With some Irish banks’ deposit to loan percentages at 40-50%, why would they increase mortgage rates when it’s cover for not increasing deposit rates?
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Because they can maybe?

KBC and Ulster about to depart, non-bank lenders have jacked up rates dramatically. Far less competitive pressure on BoI, AIB, and ptsb than 12 months ago.

For me there is a lot more scope for the three survivors to earn higher margins on mortgages than in a very long time.

I'm speculating here but am about to break and re-fix with BoI for three or five years myself. I don't see any downside.
 
NoRegretsCoyote said:
Ireland is still above the euro area average of 2.44%, but that seems to be driven weighted by France which is still at 1.58%.
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The French have a rule that restricts lenders from charging a rate that is more than 133% of the average rate on all outstanding mortgages in the previous quarter. That obviously acts as a break on the ability of French lenders to rapidly increase their rates.

It really is amazing that Irish new business mortgage rates are now very much in line with the EZ average when Irish banks don’t charge loan origination/administration fees. In fact, they do the opposite by way of cash-back deals.
 
NoRegretsCoyote said:
Because they can maybe?

KBC and Ulster about to depart, non-bank lenders have jacked up rates dramatically. Far less competitive pressure on BoI, AIB, and ptsb than 12 months ago.

For me there is a lot more scope for the three survivors to earn higher margins on mortgages than in a very long time.

I'm speculating here but am about to break and re-fix with BoI for three or five years myself. I don't see any downside.
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Did you read my post? ;)

Not increasing mortgage rates is cover for them not increasing deposit rates!
 
Gordon Gekko said:
Did you read my post? ;)
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I did indeed and follow the logic! I very carefully mentioned margins, and not rates per se.

I still think compared to a year ago there is so much less competitive pressure for both deposits and lending:
  • Two fewer deposit-taking institutions
  • Two fewer lenders (and the non-banks arguably MIA as well)
  • One lender fully out of state ownership and freer to do as it pleases
 
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