Mortgage price war in the UK - rates to fall below 1%?

http://www.dailymail.co.uk/news/art...-thanks-bank-price-war-rock-bottom-rates.html

Last week, Yorkshire Building Society cut its two-year fixed mortgage rate to 1.14 per cent. This is currently the cheapest two-year deal on the market, followed by First Direct, which charges a rate of 1.15 per cent.

Five-year fixed-rate mortgages have already edged below the 2 per cent mark, with HSBC launching a 1.99 per cent deal last month.

And even ten-year fixed rate deals have crashed to new lows. First Direct, part of HSBC, now charges 2.89 per cent to fix a home loan for a decade.

Wow I did not think rates like that would ever be available anywhere again. Hopefully one of those banks will see a major opportunity in Ireland.

I think the UK model makes more sense than the Irish model.

The cost of accepting a mortgage application, including the underwriting and any other expenses the bank incurs, are pretty fixed. Let's put the cost at €1,000 for simplicity.

Why should someone who takes a €40,000 mortgage over 5 years with Ulster Bank (minimum mortgage and term) be offered the same rate as someone taking out a €400,000 mortgage over 35 years?

I mean, the banks setup costs are costing close to 1% per year on the outstanding balance over the term for the first whilst, for the second, the setup costs are negligible. If they can make a profit at 3.3% on the first, they should be able to make a profit at 2.5% on the second.

Some of the new entrants should seriously considered the 'upfront fee' approach that many UK lenders use when coming up with the products they intend to introduce over the next couple of years.

My analysis of the fee-free rates and upfront-fee rates offered by those lenders who give the option, such as First Direct, indicates that the upfront-fee option is worth considering where a mortgage approaches £100,000 and the fee-free options for those with smaller mortgages.

Obviously, the theory behind it is that a bank can make a profit much easier from a smaller spread for the large mortgages and can charge a higher spread for smaller mortgages and recoup their fixed costs over the term in this way.

If any of these banks come into the Irish market there will be a stampede of existing variable rate mortgage holders leaving Irish banks (along with their current accounts, saving accounts, credit cards etc).

The Irish banks are making a quick buck off our backs - but wait 'til some competition comes!

SallyM,

Yup, our resident Banks are simply (creaming ) it.
When competition came in in noughties ,all the Banks then lost the run of themselves ,( going volume for vanity V profit for sanity.)
We have ended up in a poor mortgage place.

I would hope when the New boys come in , that they will learn and that customers get fair rates.
Don,t be so sure that people will shift.

They wont learn until customers actually start to switch, as for the captive ones who can't switch, I can see their doom continuing.....

Will any of those banks come here ? Why haven't they already? I'd be one of the first to move

inaquandert said:

Will any of those banks come here ? Why haven't they already? I'd be one of the first to move

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It's not exactly the biggest market in the world; how many mortgages do they need to make it worth their while? The British ones mentioned above would also presumably have most of their funding in sterling; risky enough lending euros, especially if the UK really does leave Europe. The prospect of the UK leaving Europe may also put off European banks; it would have a profound impact on Ireland. Difficulty of repossession also likely doesn't help.

WorstPigeon said:

It's not exactly the biggest market in the world; how many mortgages do they need to make it worth their while? The British ones mentioned above would also presumably have most of their funding in sterling; risky enough lending euros, especially if the UK really does leave Europe. The prospect of the UK leaving Europe may also put off European banks; it would have a profound impact on Ireland. Difficulty of repossession also likely doesn't help.

Click to expand...

Spot on with the comment on repossession , I can't see how any risk or investment committee would sign off on an entry into the Irish market given the uncertainty of negotiating the hazards of the judicial system for the enforcement of security.

None of this matters if your in negative equity on a variable

Cant switch even if Zero percent

After today
Tracker 450 euro
The SAME variable 750

It would be a very brave UK bank that would tell it's shareholders "we're going doing mortgages in Ireland" especially given what happened post Celtic Tiger and the reluctance of Irish Courts to recover properties. Even if they did, there is no reason or requirement on them to offer UK rates.