Charges To ‘ Dysfunctional’ Mortgage Market Must Be Extended To ‘ Penal’ Farm Loans
FOLLOWING on the call by the State’s competition watchdog for a concerted effort to entice new lenders into the Irish mortgage market which the Competition and Consumer Protection Commission characterised as ‘ dysfunctional’, the President of ICMSA has stated that any such effort to reform the system and introduce new practices and lenders must be extended to the area of farm loans and financing which he said was “at least” as exorbitant and dysfunctional as that of domestic mortgages.
John Comer said that Irish farmers paid not alone a substantially higher interest rate than their mainland EU counterparts but they also paid a notably higher interest rate than, for instance, Irish builders, despite having a lower a much lower rate of default on their loans and having to offer much higher security than other borrowers - usually a lien or charge on their farms. Mr Comer said that ICMSA had repeatedly highlighted what he said was the demonstrably excessive rates of interest charged by Irish banks on farm loans compared to the vast majority of EU banks and he said that no- one could be in any doubt but that a huge degree of profiteering was taking place at the expense of farmers. What made the disparity even more infuriating, he said, was the fact that all the commercial banks – whether in Ireland or Germany – were themselves borrowing the funds at the same base rates.
“The Irish banks are getting the money at the same cost as the mainland EU banks who are charging their farmer customers very significantly less and still managing to make a profit. The figures are quite shocking: the average rate charged by Irish banks to farmers as of March was 4.39% while the average rate charged across all the other Irish sectors was 3.24%. The comparable rate in mainland EU countries is 1.98% and the only banks charging higher rates than ours are in Greece, Cyprus and Malta. We should remember that those are the Irish average rates and we know that in many cases farmers are charged much higher rates than even those excessive figures. If this isn’t penal rates of interest then I don’t know what is. ICMSA calculates that Irish farmers pay around € 36 million more than other Irish small- to- medium businesses on the same borrowings and we pay about € 76 million more than EU small- to- mediums on the same borrowings. To those who say, farmers should ‘ shop around’ between the Irish banks to get a better deal, I ‘ d point out that the legal charges the bank now levies for those trying to switch loans are of the order of € 3000”, said Mr Comer.
“If the Competition and Consumer Protection Commission thinks that the Irish mortgage market is ‘ dysfunctional’ and in need of shaking up then we’d urge them to have to look at the loan system that’s applied to our farming sector – if ever there was a system that needed a shake- up then it’s that” he concluded.