Indeed - the best route to mortgage competition in the Irish market I can see are clearly the non-bank lenders.......but obviously competitive capital market rates need to be available there for the math to work for them......
I dunno the current market structure we have kind of lends itself to stability.........late-cycle as we are now......the non-bank lenders step back but AIB & BOI leverage their funding cost advantage to limit upward flow thru movements in mortgage rates.........early-mid cycle when ECB/capital market rates fall to low-ish leves non-bank lenders come back into the market forcing downward price competition in the mortgage market.
Its a model for relatively low interest rate volatility across the cycle........which would hopefully bring underlying price stability to a housing market that one day might be in equilibrium.....I know we like as Irish people house prices going up or down 10% in a year....makes for a good pub talk....but a boring housing market is the right housing market........low interest rate volatility is one component of that although by no means the only component.
The other advantage of dupoly banks to a certain extent is that given their superior RoTE.....they are less prone to pro-cyclical behaviour.....the most dangerous of which IMO is credit withdrawal during a time of economic weakness (credit binges are dangerous too but they can get regulated away via macro-prudential rules, there exists to my knowledge no regulation that can force banks to make loans in a recession).
The Irish FDI model has enough operational leverage & volatility embedded within it that "letting" two pillars bank earn 15-20% RoTE's a few years out of every ten such that they can act as shock absorbers in the bad times and lend through a recession is again an unpopular opinion but one with some truth to it.
I dunno the current market structure we have kind of lends itself to stability.........late-cycle as we are now......the non-bank lenders step back but AIB & BOI leverage their funding cost advantage to limit upward flow thru movements in mortgage rates.........early-mid cycle when ECB/capital market rates fall to low-ish leves non-bank lenders come back into the market forcing downward price competition in the mortgage market.
Its a model for relatively low interest rate volatility across the cycle........which would hopefully bring underlying price stability to a housing market that one day might be in equilibrium.....I know we like as Irish people house prices going up or down 10% in a year....makes for a good pub talk....but a boring housing market is the right housing market........low interest rate volatility is one component of that although by no means the only component.
The other advantage of dupoly banks to a certain extent is that given their superior RoTE.....they are less prone to pro-cyclical behaviour.....the most dangerous of which IMO is credit withdrawal during a time of economic weakness (credit binges are dangerous too but they can get regulated away via macro-prudential rules, there exists to my knowledge no regulation that can force banks to make loans in a recession).
The Irish FDI model has enough operational leverage & volatility embedded within it that "letting" two pillars bank earn 15-20% RoTE's a few years out of every ten such that they can act as shock absorbers in the bad times and lend through a recession is again an unpopular opinion but one with some truth to it.