Brendan Burgess
Founder
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This Fitch report was covered in the Irish media earlier in the month under such headlines as
Moves to force mortgage rate cuts would hurt banks - Fitch
Of course, stopping the lenders from fleecing variable rate customers would hurt the banks!
I have only just seen the original press release today and it's interesting reading - again confirming what we already know.
Irish Mortgage Rate Cap Proposals Negative for Banks
"The cost of funding for Ireland's banks is still higher than peers in more highly rated EU countries but the research suggests that Irish banks comfortably pass on these additional costs to consumers. Margins earned on retail mortgages in Ireland are, at around 3.5%, well in excess of the EU 2% median."
I am not sure that cost of funding is higher. Yes, the bonds are more expensive than AAA rated banks, but they account for a tiny part of the overall funding.
But even accepting this argument, it shows that the margins are 1.5% higher than the rest of Europe.
"Risks associated with mortgage lending in Ireland are still high and this provides some explanation for charging higher margins. Within the EU, only Greece reports higher mortgage arrears and default rates."
So how come the average new business rate in [broken link removed]is 2.97%? Their default rates are higher, and I presume that their cost of funds is higher.
Brendan
Moves to force mortgage rate cuts would hurt banks - Fitch
Of course, stopping the lenders from fleecing variable rate customers would hurt the banks!
I have only just seen the original press release today and it's interesting reading - again confirming what we already know.
Irish Mortgage Rate Cap Proposals Negative for Banks
"The cost of funding for Ireland's banks is still higher than peers in more highly rated EU countries but the research suggests that Irish banks comfortably pass on these additional costs to consumers. Margins earned on retail mortgages in Ireland are, at around 3.5%, well in excess of the EU 2% median."
I am not sure that cost of funding is higher. Yes, the bonds are more expensive than AAA rated banks, but they account for a tiny part of the overall funding.
But even accepting this argument, it shows that the margins are 1.5% higher than the rest of Europe.
"Risks associated with mortgage lending in Ireland are still high and this provides some explanation for charging higher margins. Within the EU, only Greece reports higher mortgage arrears and default rates."
So how come the average new business rate in [broken link removed]is 2.97%? Their default rates are higher, and I presume that their cost of funds is higher.
Brendan