It may come as a surprise to many people struggling to make their mortgage payments, but Irish banks actually have some of the lowest interest margins in Europe.
To compare, you need only look at the foreign lenders operating here – Ulster Bank, Bank of Scotland Ireland, KBC among them – to see rates that in some cases are more than twice what their local competitors are charging.
At the same time all these banks have to compete for deposits, forcing everyone to pay interest rates on savings more than 2% higher than the base rate set by the European Central Bank.
The result is that domestic banks, largely for political reasons having to do with government support through the bank guarantee and Nama, are charging less on loans than they pay in deposits for many of their loans.
As Permanent TSB chief executive David Guinane told the Oireachtas Committee on Finance and the Public Service last September, "Clearly a business model where you pay more for your raw material – what we call deposits – than you do for your finished products – what we call mortgages – is not a sustainable business model."
The 1% increase on loan rates many bank sources are predicting this year would bring Irish banks more in line with their British and continental peers.