Mortgage costs since 2007 - Higher now than then

[Fiskar]

Compliments of the CSo and Trueeconomics.blogspot.com (Dr. Constantin Gurdgiev)​

"mortgage interest costs which, per CSO data have fallen 10.7% in 2007-2011. Of course, this conceals the fact that since the Irish State took over most of the Irish banking sector, in 2010-2011, mortgage interest costs are up cumulated 28.11%. Over the same period of time, ECB rates have moved from 1.0% in January 2010-March 2011, to 1.25% in April-June 2011, to 1.50% in July-October 2011, to 1.25% in November and 1.0% back in December 2011. In other words, the average rate has gone DOWN from 1.23% in 12 months pre-January 2010 to 1.13% in 24 months since then. And yet, mortgage interest keeps on climbing... up whooping 20.4% in 2011 alone.

Yet another useful comparative that is concealed by the above data is that while mortgage interest costs might be down 11.7% on December 2007, they are up 7.7% on December 2006. Now, in December 2006, ECB rate was 3.5% or 2.5 percentage points above where it was in December 2011."

 

[oldnick]

too limited info..

Do you mean NEW mortgage costs? (which mean no trackers on offer)

If it's for all mortgages inc. existing morgages surely the overall cost is down if we include that large percent on trackers who are paying less interest than five yrs ago?

Bit more date would be useful- e.g.what was average fixed and variable rate offers for mortgages taken out in 2006 and today? what percent were tracker etc ?

 

[Brendan Burgess]

As usual, I can't make head nor tail of Gurdgiev's figures.

Here is a history of the ECB rate from t his post

|PTSB SVR|ECB rate|Margin
June 2007|5.44%|4%|1.44%
April 2008|5.69%|4%|1.69%
Jan 2009|4.65%|2.5%|2.15%
July 2009|3.65%|1%|2.65%
Feb 2010|4.15%|1%|3.15%
August 2010|4.65%|1%|3.65%
Feb 2011|5.65%|1%|4.65%
May 2011|5.9%|1.25%|4.65%
August 2011|6.15%|1.5%|4.65%
Nov 2011|5.9%|1.25%|4.65%
Dec 2011|5.19%|1%|4.19%

Around 50% of people have tracker mortgages, so their actual rates have fallen from say 5% to 2%. That is a fall of 60%.

PTSB has been the worst offender in terms of passing on cuts to those on SVR, but even the actual rate charged has fallen from 5.44% to 5.19%

Of course anyone buying a house today is paying 50% less for their house and, although the interest rate is higher, their total cost will be a lot less.

Gurdgiev seems to be selecting a particular period of time to show that costs are increasing. This is just nonsense.

Brendan

 

[oldnick]

Cheers - confirms my suspicions about our Russian pin-up economist ,hence my questioning those so-called facts.

The media love Gurdgiev because he's speaks in a foreign accent, forcefully ,quickly, often incomprehensibly- and best of all in gloom-laden terms that makes Chekov look like an optimist.
And even when written in English I have trouble understanding the logic, discovering the sources or ascertaining the veracity of some of his rambling pieces.

It is only recently that I discovered that many other people felt the same but,like me, felt they couldn't really admit it until ,at last , they saw the Emperor wore no clothes.

To be fair to Gurdgiev I'm not saying that any economist is always right -something i discovered when I spent(wasted) years studying the damn subject.

 

[Brendan Burgess]

It is extremely difficult to argue with him in person. I have gone up against him twice - on RTE's Drivetime and on Vincent Browne. He is so fast and quotes actual numbers with such confidence that one has to be very careful correcting him.

I don't understand the media fascination with him. But maybe they just want a good debate. I rarely learn anything from him. With most other economists, you learn something or you get something to think about.

Séamus Coffey took him to task here. I still can't figure out if he has admitted that he was wrong or not.

Brendan

 

[Fiskar]

To be fair the figures are quoted by the CSO and are with regard to SVRs and not trackers.

For the many of us on SVR this does prove that while ECB rates have dropped the rates charged by the Banks in particular PTSB have not gone done but gone up.

If PTSB can avail of low interest money why will they not drop their SVR rates?

Hopefully PTSB will get merged and that will be the end of them.

 

[Brendan Burgess]

Hi Fiskar

This seems to be the piece you are quoting? December Inflation published yesterday.

He makes no distinction at all in this article between trackers and SVRs.

What's worse, is that he is well aware of the fact that it refers to SVRs only as can be seen in an article he wrote in June 2011

So what CSO are saying is that current mortgages costs metric overstates the overall impact of mortgages costs increases on CPI because more mortgages, since 2006, were issued in the form of tracker mortgages.

So what is the reality?

Mortgage Interest Costs now are much lower than they were in 2006 and 2007 for everyone.
For those on SVRs - around 50% of the market - the costs are generally much lower than in 2006 and 2007, but they have risen over the last year.

Brendan

 

[Brendan Burgess]

I have now read his article in yesterday's Sunday Times. The main point of the article is how Fine Gael set up a website ripoffireland and are now ripping off the citizens through increased prices. In general state controlled services have risen in price far more than privately supplied services.

His general point is correct and the article would have your head bursting with statistics. And given the length of the article, he probably can't explain everything.

But the following is wrong and should have been omitted or clarified "in the past 5 years, mortgage interest rose 11.3% despite the fact that ECB rates have dropped by 2.5 percentage points over the period". I presume that the CSO figures which he is quoting are either wrong or misleading. But it's not the main point of his article, so I would not be overly critical. If he wrote an article on this topic without clarifying it, then it would be a huge mistake.

Health insurance costs are up 75% since December 2006...

in contrast, vehicles insureance - privately provided and similarly predictable in terms of total claims risk, has experienced just 9% inflation over the same period

The argument seems to be anything provided mainly by the state has risen in price while the private sector is keeping prices down.

I would have thought that there were far more factors at play in the health insurance vs. car insurance comparison. Health costs seem to be inflating at a rate of their own for many reasons including the advance of expensive technologies. Car insurance is lower because of the impact of the cuts in legal costs and probably because there are fewer cars on the road and improved road saftey. Private vs. public may be a factor, but I doubt it's the only factor.