Sunday Business Post – Deposits

This story appeared in the print and online edition of the Sunday Business Post on the 9th of June 2013.

Another banking win is how some heralded the  move by the NTMA to drop their savings rates, in some instances these rates reducing by over 40%. The savings products are distributed on an agency basis by An Post, but was it a decision made due to bank pressure and is there anything a saver can do about it?

To start we need to remember that typical deposit rates in normal nations with healthy banks are generally about one percent or less. Our nation is not typical, our banks are still far from healthy, so we have seen elevated rates for the last five years.

At one point in late 2008 early 2009 you could get over 5% on a one year deposit. And although the banks whine about An Post having state backing and great rates they didn’t do this when their members had the best rates during the financial crisis and only existed due to state support, sauce for …

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Deposit rates October 2012

The leading deposit rates available at present are as follows:

1yr fixed: 3.7% with KBC (min €3,000) 1yr fixed: 3.5% with EBS (min €10,000) 2yr fixed: 3.25% with NationwideUK Ireland (min €3,000)

There are a host of rates with different maturities, from demand accounts to various monthly durations. These are just the some of rates available on an annual basis.

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How to approach your bank about a mortgage problem

There are plenty of people having money related problems of late, often it is not the ‘rate’ but the ‘weight’ of the general debt that is getting them. Simply put, they have borrowed too much, sometimes its on credit cards, other times it’s a single huge mortgage or many of them. What matters is that the situation is untenable and they need to talk to a lender.

What I can say is that having a plan in place before going and speaking to the bank is a great idea, if you go along and let them control the game you will only get offered the solutions they see as being fit for you. On the other hand, if you go with a well made out plan and several options you are likely to have a higher success rate, this isn’t just my opinion, it is also something that has been said to me by several senior credit controllers across a few banks.

So have a good file with all of the necessary information, make sure that you have a plan …

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EBS rate hikes, the benefit of mutuality?

EBS have announced a rate hike of 0.6% which is a follow on from their last 0.6% hike that was levied against variable rate mortgage holders on the 1st of May, this brings their margin increases to a total of 1.2% for the year to date.

Today’s Indo lead with this story (by Charlie Weston) and rightly pointed out that by the time this is over, a person with a €300,000 mortgage over 30 years could expect to pay just over €3,000 a year (after tax) in increased mortgage payments. For a person on the average industrial wage this is like a full months wages before tax being sucked away by the financial system. Tax hikes and wage cuts aside, this will ultimately reduce the money that is being spent in the economy and it will disappear into the financial system where banks will use it to de-lever further.

The contention for many people is that they are being punished, not for what they have done …

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Average loan life set to rise as we witness the death of the 'Switcher' mortgage.

For almost the last decade we saw a market develop where customers were king, and where banks competed for their business, this was an era where ‘refinancing’, ‘switching’, and ‘re-mortgaging’ became a common occurrence, in the 1990’s the re-mortgage market was very small in comparison to where it went from 2000 onwards. The reason for the upsurge was that loyalty doesn’t pay when it comes to the Irish banks, they were giving new borrowers better rates and charging existing borrowers more, the choice of fixed rates for an existing borrower were always more expensive than for the person who had jumped ship elsewhere and come to a bank as a fresh client.

Today we are seeing something that has long been unfamiliar, banks are intentionally being uncompetitive, pushing rates to the point where they are not doing any marginal lending and where their average loan is reaching higher and higher above the ECB currently several banks have broken the 6% mark meaning that rates are now at the highest they have been in almost a decade.

This means that lenders …

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Average loan life set to rise as we witness the death of the ‘Switcher’ mortgage.

For almost the last decade we saw a market develop where customers were king, and where banks competed for their business, this was an era where ‘refinancing’, ‘switching’, and ‘re-mortgaging’ became a common occurrence, in the 1990’s the re-mortgage market was very small in comparison to where it went from 2000 onwards. The reason for the upsurge was that loyalty doesn’t pay when it comes to the Irish banks, they were giving new borrowers better rates and charging existing borrowers more, the choice of fixed rates for an existing borrower were always more expensive than for the person who had jumped ship elsewhere and come to a bank as a fresh client.

Today we are seeing something that has long been unfamiliar, banks are intentionally being uncompetitive, pushing rates to the point where they are not doing any marginal lending and where their average loan is reaching higher and higher above the ECB currently several banks have broken the 6% mark meaning that rates are now at the highest they have been in almost a decade.

This means that lenders …

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Things can only get better

Don’t be too unhappy, because although January was the worst stock market since the January of 1990, the S&P was down by 6.1% and the MSCI world index said goodbye to 7.7% of its value, markets in India and China are down (at one stage India actually had to suspend trading on their market), despite all of these things the good news is that bad times don’t last forever.

Market commentators sometimes remind me of psycho ex-girlfriends who just can’t let go, (if you want to see one of the old Internet comic phenomenons type ‘psycho ex-girlfriend into your search engine) they are the type where by the time they realise whats happened its like the whole world is falling and its never going to get any better, they’ll NEVER love anybody again! Keep the faith.

Around the world the reaction was indeed just that, a reaction, it was reactive to results and not pro-active. The fed held an emergency meeting and slashed 75 basis points off rates and then at a regular meeting they cut another 50 basis points. …

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