ptsb cuts mortgage rates

Brendan Burgess

Brendan Burgess

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www.independent.ie

PTSB ramps up the pressure with huge cuts in its mortgage rates

A new volley has been fired in the mortgage price war with PTSB cutting is lending rates by up to 1 percentage point.
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Key changes



  • 3-year fixed (60-80% LTV) reduces by 1.05% to 3.80%
  • 3-year fixed (<60% LTV) reduces by 1.05% to 3.70%
  • 3-year fixed (80-90% LTV) reduces by 0.60% to 4.50%




For higher value mortgages of €250,000 or more, new rates will be as follows:



  • 3-year fixed (60-80% LTV) reduces by 0.95% to 3.70%
  • 3-year fixed (<60% LTV) reduces by 0.95% to 3.60%
  • 3-year fixed (80-90% LTV) reduces by 0.65% to 4.25%.




For Green mortgages (BER of A1 to B3), the new rates will be as follows:



  • 3-year fixed (60-80% LTV) reduces by 0.40% to 3.70%
  • 3-year fixed (<60% LTV) reduces by 0.40% to 3.60%
  • 3-year fixed (80-90% LTV) reduces by 0.10% to 4.25%.




For Green mortgages of €250,000 or more (BER of A1 to B3), new rates will be as follows:



  • 3-year fixed (60-80% LTV) reduces by 0.30% to 3.60%
  • 3-year fixed (<60% LTV) reduces by 0.30% to 3.50%
  • 3-year fixed (80-90% LTV) reduces by 0.10% to 4.05%.




Additional changes:

  • 2-year fixed rates are reducing by up to 0.25%
  • 4-year fixed rates are reducing by up to 0.15%
  • 5-year fixed rates are reducing by up to 0.60%
  • 7-year fixed rates are reducing by up to 0.35%
 
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They are serious cuts. No idea how they are managing it. Considering the cost of capital PTSB face on mortgages compared to other banks, this smacks of desperation to recover some market share.....
 
Brendan Burgess said:
Hi Sunny

Have they lost a lot of market share?

To whom? Avant?

Brendan
Click to expand...

Yeah they have lost significant market share over past year especially with FTBs. BOI have been extremely aggressive with pricing for first time buyers as have AIB in recent months. Last I heard the two big banks were writing 7 out of every 10 new mortgages.

The problem for PTSB compared to other banks is that the capital they have to set aside for mortgages is still hampered by the crash because the model they use is using inputs from that period. I heard something about them changing model but that requires significant work with ECB and I didn't think it was due to finished until next year.

Just a very aggressive move before rate cuts even announced. I don't see how they are suddenly making money at those rates considering they were raising rates 6 months ago...
 
Taken from an RTE article "Regarding the reduction in the bank's share of the mortgage market from around 15.4% to 13.4% in the first quarter of this year, Mr Crowley said it wasn't all that long ago that PTSB had just a 2% of the market share."
 
Sunny said:
The problem for PTSB compared to other banks is that the capital they have to set aside for mortgages is still hampered by the crash because the model they use is using inputs from that period. I heard something about them changing model but that requires significant work with ECB and I didn't think it was due to finished until next year.
Click to expand...

I didn't think the interest rate they offer the loans at is directly linked to the RWA / capital required? My understanding is the Capital ratio they are required to maintain would drive how much lending they can do? The current model is inefficient thus lowers the amount they can lend, but if they increase the capital base or improve the model they can lend more?

Assuming cost of funding is the same for all the banks, the margin charged on top just hits revenue and ultimately profit?
 
DublinHead54 said:
I didn't think the interest rate they offer the loans at is directly linked to the RWA / capital required? My understanding is the Capital ratio they are required to maintain would drive how much lending they can do? The current model is inefficient thus lowers the amount they can lend, but if they increase the capital base or improve the model they can lend more?

Assuming cost of funding is the same for all the banks, the margin charged on top just hits revenue and ultimately profit?
Click to expand...

Capital is expensive. If they have to retain more capital on a mortgage, they need to charge more to pay for it. It's just about how much they can lend. They have to make a return on capital. If PTSB have to retain 15% capital on every mortgage compared to 10% with BOI, it means they have less capital generating a return. What capital they have generating a return, needs to earn more to compensate. So basically need to charge customers higher rates.
 
I’m with PTSB and they advised today that I can move to one of the new rates once they are live after the end of May. With a breakage fee of course from my rate fixed last year. I’ll battle that one separately.
 
Sunny said:
Yeah they have lost significant market share over past year especially with FTBs. BOI have been extremely aggressive with pricing for first time buyers as have AIB in recent months. Last I heard the two big banks were writing 7 out of every 10 new mortgages.
Click to expand...
So the big two are aligned in trying to move out the smaller one.
 
Sunny said:
Capital is expensive. If they have to retain more capital on a mortgage, they need to charge more to pay for it. It's just about how much they can lend. They have to make a return on capital. If PTSB have to retain 15% capital on every mortgage compared to 10% with BOI, it means they have less capital generating a return. What capital they have generating a return, needs to earn more to compensate. So basically need to charge customers higher rates.
Click to expand...

The rate they charge is a business decision though set against their ROE targets. Agree it makes it a more capital intensive business vs others but perhaps others may have capital intensive markets businesses etc.

My assumption is that this is a calculated business risk on the basis that the new model when it goes live will allow them to free up capital. Perhaps they are giving up some of their net interest margins to win back market share.
 
DublinHead54 said:
The rate they charge is a business decision though set against their ROE targets. Agree it makes it a more capital intensive business vs others but perhaps others may have capital intensive markets businesses etc.

My assumption is that this is a calculated business risk on the basis that the new model when it goes live will allow them to free up capital. Perhaps they are giving up some of their net interest margins to win back market share.
Click to expand...

Of course it is a business decision. Net interest margin is only one factor. It doesn't matter what other capital intensive business's, the other banks have. PTSB isn't competing against them in markets, trading etc. They are competing against them on mortgages though. And the other banks have the advantage of allocating less expensive capital to their mortgage book than PTSB and that is what gives them the current pricing advantage and has allowed them to aggressively price new business. Funding costs aren't even the main driver anymore.

As far as I am aware there will be no change to their model until next year at the earliest.

If I was to hazard a guess, I would say the mortgage pipeline for second half of year was looking very poor. This looks an aggressive move to get people applying now and build up the pipeline for mortgage business. They have basically though backed off 1% of rate rises on the 3 year rate. If every bank did that on the back of one rate cut from ECB, then the ECB have major problem.

It's just extremely aggressive. It's not like they were making huge money on the back of recent rate rises.
 
Bronte said:
So the big two are aligned in trying to move out the smaller one.
Click to expand...

I wouldn't say aligned. They are competing. Unfortunately that means there is a large risk that PTSB will get squeezed. Hence their desire to diversify their loan book by chasing SME and asset finance business.
 
Sunny said:
I wouldn't say aligned. They are competing. Unfortunately that means there is a large risk that PTSB will get squeezed. Hence their desire to diversify their loan book by chasing SME and asset finance business.
Click to expand...
I'm too long around and have seen too much from those two banks to ever believe they compete with each other. One of my very first posts on here was about how aligned they are.
 
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