Mortgage Interest Rates

Joziburg

Why are variable interest rates on mortgages so high, almost equate to fixed!?

Starting to look into first time buyer mortgage and trying to get head around the interest rates. Just don't get why the variable are so high!!

myshirt

So high!?

They are the cheapest they've been in a while!

Albeit, we are overcharged here in Ireland given they get the money at about 50bps and charge nearly 350 to 400.

john.han

It's mainly because Irish banks have a large number of loss making tracker mortgages on their books. Other reasons include a desperation to make huge profits so that those that are in either partial or complete state ownership can be returned to entirely private ownership. A complete lack of real competition in the market is also a factor. EBS and AIB are effectively the same company so no motivation for them to compete with one another, KBC have the most competitive rates but have been actively considering exiting the market. The Irish competition watchdog don't want to know as it would be too much work for them to investigate, but banks offering mortgages in the Irish market effectively operate as a cartel.

Chris_5339762

Also the fact that it is extremely difficult to repossess the properties of those that cant/wont pay and that means the banks have to factor a much larger risk in.

newacc2015

It is extremely difficult to repossess property here. You can basically not pay your mortgage and get away with it. Meaning you have levels of default in Ireland that is significantly higher in Ireland than elsewhere in Europe. Paying customers, are paying for the huge amount of loan books that are not paying.

There is no competition really. Frank Money has been waiting on approval from the Irish central bank for ages now. Whereas 10 years ago they could just start handing out mortgages. A non-bank money lender is how most mortgages are being issued in the US at the moment, which Frank Money is. But the central bank haven't given them a license and no one knows why really

ted1

myshirt wrote: »

So high!?

They are the cheapest they've been in a while!

Albeit, we are overcharged here in Ireland given they get the money at about 50bps and charge nearly 350 to 400.

Compare them to the ECB rate or European banks and they are very high

john.han

It isn't that difficult to repossess property, check out the number of cases AIB have begun in recent weeks, the law is firmly on their side. Reality is banks have been dragging their heels in recent years. Partially for PR reasons, partially in the hope of a property price recovery. Our default rate has nothing to do with how hard it is to repossess. We had outrageously reckless lending, 100%+ LTV mortgages, with no adherence to income limits, combined with a jump in unemployment from 4% to over 15%, once people defaulted they were then trapped as for most the property was half the value of the loan (or worse).

Non-recourse mortgages don't exist here so risks are balanced in favour the lender, they can repossess and still pursue the remaining debt. Their own lending policies were what did the damage (which they are now trying to recoup via excessive margins on new lending.