AIB and Ulster Bank refuse to pass on cut to variable rate customers

AIB and Ulster Bank refuse to pass on cut to variable rate customers

AIB has announced that it will not be passing on the latest ECB interest rate cut to its variable mortgage customers.

Ulster Bank has also confirmed that it will not be passing on the cut – the second successive month that they have failed to pass on the 0.25% reductions.

EBS, which is now part of AIB, will reduce its variable rate by 0.35 points, however, with other banks still weighing up the decision.

The quarter-point cut automatically applies to tracker mortgages and could save customers €700 a year.

One bank who will be passing on the cut to its variable mortgage holders is Permanent TSB. The lender said they planned to reduce interest rates on a number of variable rate mortgages held by both residential and investor customers by as much as 0.71 percentage points, including the latest cut.

Bank of Ireland is also passing on cuts of between 0.10% and 0.15%.

Explaining its decision not to pass on the cut, AIB said both it and EBS had passed on November’s rate cut in full. The bank says its mortgage portfolios are currently loss making and that this undermined the prospect of a future return to Irish taxpayers on their significant investment in the bank.

AIB says the cost of funding the bank is no longer determined by movements in the ECB’s rates, due to the higher price of attracting deposits and “the continuing absence of a functioning wholesale market.”

It remains to be seen what, if any action, will be taken by the government against AIB and Ulster Bank with Tanaiste Eamon Gilmore earlier in the day calling on banks to pass on the rate cuts.

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