Irish Banks Face a Crunch as Clients Avoid Long Term Loans reports Payday Ninja 

(MENAFN Press) (EMAILWIRE.COM, November 18, 2012 ) Manchester, U.K --

Banks in Ireland charge more interest than the eurozone average for recent loans but less than average for long-term loans.

Those numbers, released by the Central Bank of Ireland, are indicative of the challenges facing the country's banking system. Irish lenders functioned on low margins during the period of rapid growth, many of them tapping into easy credit.

Many lenders took a wrong turn from traditional banking practices in the first part of the past decade. They went to money markets to obtain inexpensive credit and failed to align their loan books with their deposit books. Interest on loans was at a low.

Irish banks now have the hard work of becoming profitable again after the market burst. Their loan margins are not high enough, and they are paying too much for deposits.

The Central Bank looks at home loans, for which interest rates tend to be lower than in the rest of the eurozone.

Average interest rates on outstanding mortgages in Ireland have reflected movement in the ECB's main refinancing rate to a greater extent than the euro area over the last number of years, the bank stated, according to the Irish Examiner.

This relationship is principally derived from the higher proportion of tracker' and variable rate mortgage products in the domestic market.

The size of tracker mortgage books is significant for both AIB and Permanent TSB.

The average weighted interest rate on a mortgage in the Eurozone at the end of September was 3.66%. In Ireland the rate was 2.9%, and that was after a drop of 0.16% since the year began.

The rate for short-term loans has risen in that time period by 0.26% to an average of 9.26%. The average in the Eurozone was 7.81%. Long-term loans averaged 3.94% at the end of September after a decline of 0.47% since the beginning of 2012.