Responding to the most recent Central Bank Retail interest rates publication for June, showing Ireland at a weighted average interest rate of 4.04 percent, up 136 basis points in annual terms and a 12 percent decrease on the previous month in the volume of pure new mortgage agreements, Brokers Ireland has stated that it is “clearly evident the dampening effect the questionable and aggressive interest rate stance is having on potential home owners, at a time of strong and pent-up demand for homes.”
Rachel McGovern, Director of Financial Services at Brokers Ireland said with little movement on savings rates “lenders are having a bonanza right now as we’ve seen in their profit margins for the first six months of the year.”
She said the diminution in competition with the exit of both KBC and Ulster Bank is not helping adding that it was notable that at 5.28 percent variable interest rate non-bank lenders had a margin of 1.64 percent above the pillar banks.
“Without sufficient competition these figures demonstrate what unbridled control over interest rates deliver. It could be argued that lenders have a duty of responsibility to behave fairly but there is nothing more than that. Regulators or Government can attempt to influence but there is currently no law or regulation that compels them to behave fairly,” Ms McGovern remarked.
She said it does beg the question of who is really looking out for consumers.
“While a market of high lender profits is likely to attract in new lenders, it could take some time. Meanwhile many aspiring borrowers are put off taking out mortgages because of the expense and existing borrowers are squeezed, some to breaking point.
“Italy, out of left field, has just delivered a surprise blow to its financial sector by setting a one-off tax on profits reaped from higher interest rates, which may give some pause for thought and shows not all policymakers are prepared to let the profiteering continue unabated,” she added.
Ms McGovern said all existing mortgage holders who have not done so should review their positions, and ideally seek the advice of a mortgage broker.
“There are still substantial savings to be achieved by many borrowers. There are still good fixed rates in the 4.05 percent to 4.8 percent range to be got for long periods of ten years. There are also five year fixed ‘green mortgage’ rates of 3.70 percent upwards (depending on loan to value ) for those with homes that have a BER rating of B3 or better,” she concluded.
