HOMEOWNERS FACE a rise in interest rates as the Government exacts a higher price from lenders for extending the bank guarantee.
The chief executive of the EBS building society, Fergus Murphy, said the increased cost of the guarantee alongside growing pressure on profit margins meant an increase in standard variable rates was likely in the near future.
Speaking on RTÉ, Mr Murphy said: “It is true to say that the cost of the new guarantee under EU rules will be much more expensive than the current guarantee.”
EBS had no plans to raise rates for the next three months, he said, but there will be “upward movement” in the standard variable rate.
Mr Murphy acknowledged that Irish lenders played a key role in helping to create an overheated economy and said the lessons of the past must never be repeated.
“I can absolutely understand how the man on the street would still be fuming over what happened over the last year,” he said.
Mr Murphy believes there will be a gradual improvement in the Irish banking sector following the Government’s disclosure over the scale of loans to be transferred to the Nama. However, he stressed that there was no “single bullet” scenario where banks would return to full lending overnight.
Meanwhile, ratings agency, Fitch, said EBS will need “external support” following the transfer of loans with a face value of €1 billion to the State’s “bad bank” and downgraded its long-term issuer default rating as a result.
