These entities have entirely different funding models. They can’t borrow as cheaply as banks. Conventional lenders are also profiting from low-paying current or demand accounts which keep their funding rates low. So, when the European Central Bank raises rates, they need to reprice their assets quicker than banks, in other words hike rates faster.
The pass-through to customers from non-bank lenders has been more aggressive. In some cases, borrowers have been hit with the full amount of ECB rate increases. Start Mortgages says it has not increased its variable rates since January. “To date Start Mortgages has increased variable rates by less than 2 per cent,” a spokesman said. It didn’t provide an average SVR.
The same question was later posed to then minister for finance Paschal Donohoe, who insisted the current code of conduct, in relation to how mortgage holders are treated, travelled with the loan and therefore protected “everyone equally”. The industry will push against this narrative, insisting that this is a secondary banking market, involving predominantly distressed borrowers.
The code of conduct for providers, the protections afforded borrowers might be the same but that’s cold comfort, and almost immaterial, for someone who has seen their variable rate jacked up to 8 per cent.
Source: Loan Digest (loandigest.net)
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