How big are the Banks' losses on Tracker Mortgages?
There are probably 300,000 tracker mortgages on the Irish Banks Balance sheets. Some of these are generating as little as 0.65% on top of the ECB rate.
If the average tracker was €200,000+ the total sum for trackers is probably of the order of 60billion. the banks borrowed short term and bet long term that they could make money lending at as little as 0.65% above the ECB rate.
If the banks were making a gross loss of 0.5% on these loans the ball park loss would be 300 million. Could the losses of the banks on these loans reach a billion a year or more?
Under the current capital reserve rations 60 billion of lending requires 4.8 billion of the banks' capital. So a lot of bank capital is tied up making a loss.
Even if the borrowers pay every cent back that they are required to these loans are set to be loss makers for much of the next decade.
I don't know what the losses are for the banks on these loans but they may turn out to be even greater loss makers than they are at the moment.
There is little prospect of more competition in the lending market until the property crash is completed.