Fixed rate comparison Ireland

When it comes to fixed mortgage rates in Ireland there is a little confusion, the first being about ‘whether to fix or not’ and secondly, if by doing so will you lose out should Irish lenders choose to lower their mortgage rates.

The simple answer is that if you fix your mortgage you may win or lose depending on what rates do, but that is missing the point of why you fix to begin with. It provides you with certainty of payments and often there is a premium due because of this, in simple terms, you pay a bit more for the ‘fixed’ assurance.

Below is a list of some of the best fixed rates in Ireland as well as who offers them.

Best 3yr fixed rate: 3.6% offered by PTsb and Bank of Ireland

(note: you can get better again by going with KBC and opening an account which gets you 3.55%)

Best 5yr fixed rate: 3.8% offered by Ulsterbank, BOI and Haven/AIB

These are ‘tiered variable rates’ meanining you have to have a low loan to value or …

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Newstalk: Pat Kenny Show on variable rates

We were asked to speak with Pat Kenny today about variable rates and the government plan to intervene to make banks drop them. This was, after considering various pieces of evidence shown to be a deeply political rather than pragmatic move. We also demonstrated that there are documents which the Minister for Finance had drafted up with the banks specifically stating that he would not intervene on matters of pricing, the recent round of ‘meetings’ is in direct contravention of that.

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Drop rates so banks can lend more…

In the ongoing variable rates pricing fracas there are many points being overlooked. The first is why our mortgage rates are higher than other European countries, but we should just ignore that – at least to stay popular.

We’ll say that the government/Central Bank pressure works and banks drop their rates, what next?

We might get around to the greater number of people under price pressure for housing (the renters), but that’s unlikely, instead we’ll inadvertently drive up house prices a little more by making credit more easily available.

Because the lower the variable rate the lower the stress test. Lower rates equals more credit, it’s a fact of life in lending.

You heard it here first. The lower variable rates go the more it frees up a persons lending capability. We have covered the way the Central Bank lending rules won’t work to the point of being annoying (and we weren’t alone, the ESRI and …

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Mortgage rates set to drop and competition to increase in 2015

We have commented several times since last year that the trend for mortgage rates in 2015 will be to see them drop. With spreads of c. 300bp’s on lending it makes it one of the reliably profitable sectors of banking given the stringent underwriting being applied.

With the Central Bank looking to curtail first time buyers but doing nothing about incumbent borrowers getting restricted it means that they have directed the market towards refinancing.

This is because one of the niches left on the table is that of existing variable rate holders, which banks will now try to tempt away from one another in an effort to grow market share.

There are many who cannot take part and below is a list of the mortgage holders who won’t benefit.

Those in negative equity, they are going to be stuck when it comes to refinance, they can trade up with a negative equity mortgage but they won’t be able to ‘switch’. Those on fixed rates which accounts for in the region of 50,000 mortgage accounts, they face break penalties, and only …

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KBC launch a ‘quick approval’ process

For a while we have seen competition starting to heat up a little in the mortgage market. Several moves recently have started to demonstrate this further, Bank of Ireland have their ‘pay you to borrow from us’ campaign, KBC had a ‘pay you to switch’ along with rates that beat everybody else.

Now they (KBC) have launched a quick approval process which aims to cut down the time it takes to get approved which at it’s worst was taking up to four weeks with some banks. This is only for an approval in principle, which isn’t worth much (not like a loan offer is) but it is the first step in the mortgage process in terms of getting meaningful feedback from a lender.

They have a first time buyer 1yr fixed rate of 3.5%, short term fixed rates are where banks tend to go to attract business as the first year costs are what many buyers are fixated on rightly or wrongly.

There is one bank rumoured to be considering a return to brokerage, another who shut operations considering re-opening …

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Best mortgage rates September 2012

Mortgage rates are constantly under review and even though we might be expecting an ECB rate cut this week to 0.5% (which will be a historic low) it is highly likely that rates will sit still or even rise. The conundrum for consumers is about the rate choice, banks have just upped rates prior to any rate cut and by doing this then not passing on a rate cut they actually increase their margin significantly.

The best mortgage rates at present are below:

<50% LTV: AIB 3.34% >80% LTV: AIB 3.79% 1yr fixed: AIB 4.15% 2yr fixed: BOI 4.49% 5yr fixed: PTsb 3.7%*

*The PTsb 5 year fixed rate is a good example of a pricing discrepancy that is related to the PTsb loan book, this rate is excellent, lower than the standard AIB variable and fixed for 5 years! The reason for this is that by lending on this type of property PTsb will increase their assets (to fix the loan to deposit ratio that is too high) quicker and in return they will give up some margin.

If …

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AIB to increase rates, the official message

We have reviewed our Variable Home Mortgage interest rates which are currently the lowest in the market. Our current interest rates are unsustainable due to the fact the interest rates charged on mortgages do not cover the high cost of funding and the cost of servicing the accounts. Based on these considerations, AIB will increase the rate on all Variable Home Mortgage Interest rates by 0.50%, effective from the week of 3rd September 2012.

All impacted customers will be notified in writing week commencing 30th July 2012.  Letters will include the date from which the new rate will apply, details of the old and new rate and the revised repayment amount.

Summary of Variable Interest Rate Changes

Existing Residential Owner Occupier Standard Variable Rate will increase by 0.50 % from 3.00% to 3.50%

Loan to Value Variable Rates for Owner Occupiers will increase by 0.50%

Buy-to-Let Standard Variable Rate will increase by 0.50% from 3.95% to 4.45%

Tracker Mortgage Rates and Fixed Rate Mortgage interest rates remain unchanged

We will issue a revised rates matrix to reflect these changes prior …

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Bank cost of funds versus mortgage prices

Eurodollar or LIBOR cost of funds is a common phrase in banking, what does it mean or do though?

Banks borrow short term and lend out long term, they call it ‘maturity transformation’ and in doing so they aim to make a mark up on the money, it’s the same concept that a shop uses in selling cartons of milk, fundamentally the idea is the same.

The LIBOR rate is ‘London interbank offer rate’ and represents the cost of funds for a high quality non-governmental institutional borrower.

To get an idea of the cost of funds (and this is currently speculative because Irish banks don’t get offered funds at Euribor [euro equivalent of Libor]) all you have to do is a simple calculation.

We know that banks tend to use three month money and that means that any calculation will always have the interest rate reduced by multiplying it by 90/360 (3 months = 90 days, and 360 = 1 year [I know that in real life 1 year is 365 days but that small change of 5 days gives …

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Why a borrower bailout is not likely

The EBS is on the block and there have been countless headlines regarding the idea that debts might get written down by Wilbur Ross if the Cardinal Capital group (who he is backing) are the successful bidder. I have said that I doubt this will happen and will set out why in this post.

EBS carried out a PCAR (prudential capital assessment requirement) test in March 2010, it showed that they required €875 million in funding to come up to scratch. Thus far they received €100m in cash from the state and a further €250m in a promissory note leaving a gap of €525m to fill. The bids being touted are in the region of €550m meaning that whoever buys in is effectively bridging the gap and paying a small premium as well.

Take a look at a balance sheet and you’ll see that no matter what happens, that in the end assets=liabilities. That is an accounting identity, in our example we have a hypothetical bank which has assets and liabilities worth (for example sake) €100 million Euro.

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