How much does it cost banks to borrow money?

littletiger

Does anyone know how much it costs banks to borrow money at present. I have a mortgage that I could pay off, but I want to try to do a deal with the bank where they write off a portion of the debt.
The reasoning is that if I pay off my mortgage now, they will save money by not having to borrow for my debt.

Anyone any experience of this?

Bill2673

littletiger wrote: »

Does anyone know how much it costs banks to borrow money at present. I have a mortgage that I could pay off, but I want to try to do a deal with the bank where they write off a portion of the debt.
The reasoning is that if I pay off my mortgage now, they will save money by not having to borrow for my debt.

Anyone any experience of this?

banks borrow money from a number of sources:

(i) deposits, current and savings accounts.....I'd say average rate here is usually 0.5% below ECB rate.

(ii) interbank borrowing: i,e, they can borrow from other banks....

(iii) corporate bond issuance.

At the moment, the interbank route is closed to the Irish banks, as other banks won't lend to them.

The irish banks still have a number of corporate bonds outstanding, as is well documented. I'd say the average rate (coupon) is 3%.

this leaves the last source of funding; which is borrowing from the ECB. Irish banks are forced to do this because other banks won't lend to them. The funding rate here is 1%.

As such, their current funding on average is quite low.

The problem is that as bonds expire, they will need to get new funding from somewhere; where this is will be is not quite clear. Also, I believe the ECb is unhappy about the 1% rate; and wishes to see this rise. So (i) they still have a good deal of cheap funding (ii) this will not remain the case (iii) where it will rise to is not clear.....but ultimately, trackers are/will be a big problem for the Irish banks.

Thats my understanding. I don't work for a bank; don't take it as factually being bulletproof; its my best guess of the situation.

BuffyBot

TBH your mortgage is but a small drop in the ocean. I don't see your reasoning swaying them in the least on that front.

Bill2673

Agreed....

I've heard a lot of talk about the banks offering to wipe out part of the capital repayment if mortgage holders are willing to swap a tracker for a variable.....

I've not come across anyone who has done it.

Is it all idle talk?