IIB Follows Rivals in cutting interest rates

The_Conductor

IIB follows rivals in cutting interest rates.

Story in today's Indo here.

Tuesday August 19 2008

IIB HOMELOANS yesterday became the latest lender to cut its fixed mortgage rates, in a move that offers a small chink of light in an otherwise beleagured home-loans market.

Cuts of up to 0.30 of a percentage point have been announced by the lender for its two, three and five-year fixed rates.

New two-year fixed rates have been introduced, as well as a new flexible mortgage where homeowners can split their mortgage between fixed and variable amounts, over different terms. For example, 50pc of the mortgage could be fixed for five years, with the remaining 30 years on a variable rate.

Last week EBS cut its threeyear rate for home buyers. This is falling by 0.35pc to 5.79pc, below the market average of 5.99pc.

Its broker operation Haven is cutting its fixed rates for two, three and five-year rates by up to 0.30 percentage points for residential properties and by up to 0.40 percentage points for investment properties on three and five-year rates. Recently, Bank of Ireland cut its two and three-year fixed rates.

Fixed

With indications coming through that the European Central Bank is unlikely to raise wholesale interest rates, lenders are more confident about cutting fixed rates, according to Frank Conway of the Irish Mortgage Corporation.

Flagging growth in Germany and a fall in oil prices have meant the ECB will probably not carry out its previous threat to raise rates.

But while the change in the ECB’s position has been reflected in a fall in fixed rates on wholesale money markets, there has been no fall in the cost of three-month money.

The cost of borrowing in euros for three months is near the highest level since December 2000, according to the European Banking Federation.

The euro interbank offered rate – or Euribor – fell 0.01 percentage points to 4.96pc, EBF data showed yesterday. The oneweek rate remains at 4.39pc.

Financial institutions are still hoarding cash a year after global credit markets began seizing up, leading to more than $500bn (€350bn) in bank writedowns and losses.

Meanwhile, new figures show the value of mortgages advanced in the three months to June dropped 13pc, bringing the decline for the first half of this year to 16pc.

Just over 35,000 new mortgages, worth a total of €7.5bn, were advanced in the second quarter of the year, compared with 41,000 mortgages, worth €8.7bn, in the same period last year.

Some 63,000 new mortgages, totalling €13.8bn, were advanced in the first half of this year, compared with 79,000, worth €16.5bn, in the first six months of 2007.

However, the rate of decline on first-time mortgages slowed in the second quarter compared with the first three months.

- Charlie Weston

faceman

Im out of touch! I didnt realise other lenders had done this already!

SimpleSam06

Meh, fixed rates always were a lot higher than variable rates, can't see it as being much of a hit to them. Call me when the variable rates start being cut. Its also probably a reflection of the tightened lending criteria, its safer to cut rates when you aren't lending out so much.

I'll be watching what happens with the Alt-As and Primes in the US over the next year though, the rumblings are they are going to knock the subprime crisis into a cocked hat.