AIB and Bank of Ireland have said they will keep their variable mortgage rates under review, following Permanent TSB’s move to cut its rates and a hint by Taoiseach Enda Kenny that October’s budget could be used to “deal with the banks” on the issue.
After a series of meetings between lenders and Minister for Finance Michael Noonan, banks were given until July 1st to offer cheaper mortgages to customers or risk sanctions.
In response, Permanent TSB has said it will allow about 70,000 mortgage customers on standard variable rates of 4.5 per cent to move to new rates that will start from 3.7 per cent.
The new rates will vary depending on the amount owed by customers and the current value of their home, and the highest rate charged will be 4.3 per cent for customers in negative equity and customers with mortgages equal to 91 per cent or more of the value of their home.
Eligible customers
Permanent TSB said it will write to eligible customers about its new rates in the coming weeks.
Meanwhile, AIB cut its standard variable rate by a quarter of a percentage point to 3.9 per cent in May, with the change coming into effect in the last month. This came on top of an earlier quarter-point cut to its standard variable rate in December 2014.
“We keep our mortgage rates under review,” it said on Wednesday.
Bank of Ireland, which charges between 3.9 per cent and 4.5 per cent on its variable interest mortgages, also said it kept the pricing of all of its products under active review.
“ Products - including mortgages - are priced to reflect the cost of funds to the Group, the estimated potential loan losses from the portfolio, recovering our costs including our staff and infrastructure costs, and the capital required to support the products,” the bank said.
Bank of Ireland’s statement also highlighted cuts to its fixed interest rates in May - the lender has been keen to promote the “certainty” offered by fixed-rate mortgages, which half of its new customers now choose.
Noonan’s warning
Mr Kenny told the Dáil he expected to see the banks reduce their interest rates following the warning issued by Mr Noonan. But he also noted that three banks had already introduced measures that would see variable rates fall below 4 per cent.
“We have a budget coming up in October,’’ Mr Kenny said. “There are opportunities for the Minister to deal with the banks if that is the case and if that is necessary.’’
However, Sinn Féin finance spokesman Pearse Doherty said the deadline had “largely been ignored” and it was clear that the Government was “not willing to stand up to the banks” on interest rates.
He described its handling of the issue over the past four years as “a cruel failure”.
