Today Ivan Yates spoke to Karl Deeter about the PTsb rate increase. There were several points to consider surrounding this and Ivan touched on perhaps the most important which is about credit provision in general.
Yesterday AIB increased interest rates for both existing and new borrowers. This comes as a huge blow to consumers, in particular given that the consumer is the same taxpayer who has done so much to bail out the bank. Do people have the right to be angry? Hell yeah they do!
The move has been coming for quite some time, we have been harping on about this for over a year, the most recent prediction was to put a time-frame and figure on the hikes, stating that it would start in Q1 of 2010 and in the course of the year we’d see c. 100 basis points or 1% of an increase across the board with a further 50 basis points or 0.5% in 2011. Today’s Independent has stated that we can actually expect all of it in 2010.
Why is this happening?
Simply put, the banks are not charging enough to cover the costs of loans that are not performing. In a way you …
The current debate is raging over NAMA and the pricing of loans, much of it centres on the value of the properties in question and about the way in which a ‘loan’ is valued (as opposed to the underlying asset). This makes for good headlines, but it doesn’t help the average person who is not shaping policy and who’s sole role in this mess will be to carry the can and pay their part in the tax pool which will ultimately fund the bailout.
However, you may be affected in other ways, and these are things which you have the choice of opting out of, namely that of the margin you are paying if you currently have any debt/credit outstanding.
Once NAMA comes in it will be extremely likely that banks increase their margins, it is important to consider the ‘why’ as much as the ‘when’ though so we’ll take a look at those.
PTsb lead the way on this, because they are not getting NAMA protection they have no need to worry …