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Business Interest Rates

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  • 19-06-2013 9:55am
    #1
    nipper banks
    Registered Users Posts: 37 ✭


    Hi,
    Does anyone have any info on how Bank Prime Rates are set? Many business loans are based on this rate (plus a margin for the bank). The Bank of Ireland Prime rate has remained at 0.72% since before the last ECB reduction of 0.25%. I have been told that it will reduce in line with market rates, but that there may be a time lag. However, I'm beginning to wonder if they intend reducing it at all?


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    #2
    nipper banks
    Registered Users Posts: 37 ✭nipper banks


    Hi Guys,
    Is noone but me bothered by this? I understand that most of the major banks have not reduced their Prime rates, since the ECB reduced by 0.25% some months ago now.
    I have a feeling of being ripped off. Am I alone in this?


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    #3
    dbran
    Registered Users Posts: 2,094 ✭✭✭dbran


    Hi

    If you are on a variable rate (or fixed rate) mortgage then it is not tracked to the ECB rate and the banks can set whatever interest rates they like.

    Given the fact that most folks are in negative equity it is impossible for them to move in reality and thus you are a stuck.

    The reality is the banks are loosing money. If they lower the rates then we (the tapayer) have to put more money into them to shore them up. So you are not going to see them follow the ECB rate any time soon.

    Regards

    dbran


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    #4
    sandin
    Closed Accounts Posts: 1,594 ✭✭✭sandin


    nipper banks wrote: »
    Hi,
    Does anyone have any info on how Bank Prime Rates are set? Many business loans are based on this rate (plus a margin for the bank). The Bank of Ireland Prime rate has remained at 0.72% since before the last ECB reduction of 0.25%. I have been told that it will reduce in line with market rates, but that there may be a time lag. However, I'm beginning to wonder if they intend reducing it at all?

    market rate and ecb rate are 2 different things.

    usually the market rate is higher and doesn't necessarily come down in line with the ecb as its based on risk in the market.

    That's why banks are losing so much on trackers as they are tied to the ecb - if trackers were tied to a market rate, the banks would be a lot happier.


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    #5
    Voltex
    Registered Users Posts: 1,580 ✭✭✭Voltex


    What does BOI borrow the money at?
    We can talk about trackers, ecb, Libor, Euribor till the cows come home but the only way for banks to make money (and yes they do have to make money) is to sell loans at a higher rate than they are borrowing the money.

    BOI will only reduce rates in line if its contractually agreed or if they are maintaining their margin.


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    #6
    DubTony
    Registered Users Posts: 3,269 ✭✭✭DubTony


    That's the free market in action nipper. Be thankful for it. You benefit from it every day. The only downside is the scumbags in the banks can benefit from it and use it to their advantage. C'est la vie.


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    #7
    nipper banks
    Registered Users Posts: 37 ✭nipper banks


    Thanks for all the comments, guys.
    I know its easy to be cynical, but I still hope the bank Prime rates will come down closer to the interbank market rate, which is below 0.5%. I saw on another site that 40% of lending to business is based on the Prime rate, so there most be a lot of people like me, who are paying above the odds at the moment.


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