A former Bank of Ireland CEO has admitted that variable mortgage rate holders are paying for the banks’ losses when it comes to tracker mortgages.
Mike Soden said that banks had no choice but to up their variable mortgage rates in response to the costly mistake of providing mortgages at the level they did.
His comments came just 24 hours after Bank of Ireland’s decision to increase it and its subsidiary ICS Building Society’s rates by 0.5% from next month.
Mr Soden said this sort of increase was necessary for the banks to return to profitability.
“People thought this was a great idea until four or five years later we are looking at the cost of these tracker mortgages. They have put the banks into a perilous situation,” said Soden.
“They are lending out money that is costing, like, you buy a product at 100 and you sell it at 80 or 70 and that is fundamentally what the banks are faced with at this moment in time.”