When the chief executives of three of the biggest financial institutions in the State were called before the Oireachtas finance committee this week to justify charging 300,000 people with standard variable rate (SVR) mortgages four times what they charge trackers holders, a degree of schadenfreude was perhaps forgivable.
The committee wanted to know why SVRs at the State banks were above 4 per cent when the average tracker is just over 1 per cent and the average SVR across the euro zone is 2.47 per cent. Its members repeatedly asked if it was fair that someone with a €300,000 mortgage on an SVR had to pay almost €650 a month more than someone with the same size tracker mortgage in the same bank particularly when costs to banks have fallen dramatically as a result of reduced risk in the market and cheaper money across the euro zone.
AIB was first up and the first to buckle – albeit only slightly – under the pressure. Chief executive David Duffy told the committee the bank would be willing to lower its SVRs within weeks. This was followed up with a rate cut of up to 0.38 per cent yesterday.
Responses from Bank of Ireland and Ulster Bank to the same questions were more robust. Both said their SVRs were competitive and a reflection of their costs. KBC and Permanent TSB said much the same when asked by this newspaper.
The Taoiseach, the Minister for Finance and the Tánaiste have all rounded on the banks in recent days and called on them to reduce their rates or face levies.
The banks seem unmoved. With the exception of AIB they have not changed their rates and stick with the increasingly untenable line that they are fair and competitive.
They can do this because they know the Government is powerless to force them to do anything. And they know their customers do not seem motivated enough to put manners on them by actively seeking better value elsewhere.
The banks have been hauled into Government Buildings before over their high SVRs and have always ignored calls from politicians to do something. And they have faced no consequences for doing so.
Now there is talk of imposing levies on them but they know that levies can be passed on to customers who have shown themselves to be remarkably passive when it comes to switching banks.
Until they get a sense that high rates cost them customers and cost them money, we can expect little to change.
