Tuesday 16 July 2019

The message is keep paying the 'Paddy Premium'

Stock photo
Stock photo
Charlie Weston

Charlie Weston

A decade after the banking collapse, we continue to pay way over the odds for mortgages and other banking products in this country.

Bankers continue to exact a huge toll for the mess that they created.

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Interest rates on new home loans here are almost double that being paid by a borrower who is buying a home in the likes of Spain, Austria or France.

The difference in the average new mortgage rate in this country compared with the rest of the eurozone is €154 a month.

Over a year, this works out at €1,850. That is a heck of a lot of money. It could be called the 'Paddy Premium'.

Having bailed out the banks with our hard-earned tax euro, we continue to financially support them by paying the second most expensive mortgage rates in the eurozone.

Remember that ECB president Mario Draghi blamed a "quasi-monopoly" among banks here for the high rates when he addressed an Oireachtas committee in Dublin.

Banks argue they are hamstrung by factors beyond their control that mean they cannot cut rates further.

Regulatory rules mean they have to set aside huge amounts of capital for every €1,000 of lending compared with other eurozone countries.

This reflects high mortgage default rates since the economic collapse.

Political moves to cap variable rates have been resisted by the Central Bank and the European Central Bank.

All this means banks are unlikely to cut rates further.

Most existing mortgage holders, who are not on a tracker, have probably factored this into their budgeting calculations as the Central Bank says 72pc of all new agreements are now fixed rates.

So the message is: Just stay quiet and keep paying the 'Paddy Premium'.

Irish Independent

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