Interest rate cuts welcomed but more is needed

Interest rate cuts welcomed but more is needed

The New Year brought about some welcome news for those looking to buy a home this year when both Bank of Ireland and Permanent TSB announced they would be lowering some of their mortgage interest rates.

In PTSB’s case, cuts of up to 0.42% in variable rates will be applied from Monday to new customers and those on existing “managed” variable rates (MVR).

In Bank of Ireland’s case, the variable rate is being cut for new customers depending on the loan-to-value ratio.

In both cases though, those paying standard variable rates (SVR) have been left wondering when they will get some reprieve.

Bank of Ireland have at least offered revised fixed rates for new and existing customers and suggest that these offer good value to existing standard variable rate customers.

However, if you happen to fall in to this bracket you could be forgiven for feeling a bit peeved.

Many of these rates were well above 4% last year. This was a major rip off at a time when the European Central Bank’s key rate was falling to just 0.15%.

The failure to cut the SVR in recent months and years was explained away by the banks as necessary to help them return to profit after the economic crash left them nursing big losses on their tracker mortgages while also having to pay higher rates themselves to secure funding. It was part of the price we had to pay to save the banks, as if a €64 billion bail out wasn’t enough.

AIB did cut SVRs by 0.25% in December but the fact that move is estimated to have cost them €40m then you can see why the others are not following suit, particularly in PTSB’s case who are not expected to return to profitability until 2017 at least.

Last year MEP Brian Hayes said it was “pathetic” that more than 200,000 SVR customers were being excluded from benefitting from the record low rates.

He said: “Those lower rates are a million miles removed from those being charged in other euro zone countries. It’s holding back a group of people who need to start spending again.”

Hayes is planning to lobby the ECB on the matter but until some form of serious intervention is taken the new customers will benefit while those who have been loyal and kept up payments will continue to be taken for a ride. A very expensive one at that.

There are 6 comments for this article
  1. Paddy at 7:24 pm

    I’ve been a loyal customer of BoI since my teens. I’m on a variable rate mortgage & considering historically-low ECB rates I am extremely angry that BoI is ignoring its existing mortgage account holders.

  2. Pingback: Interest rate cuts welcomed but more is needed | Rosalie Rodney
  3. andrewmartinphoto at 2:43 pm

    Do we not already own the banks?? After all, it was our money that saved them…

  4. Paulo at 2:40 pm

    I do not understand how the “banks” are losing money on their “expensive” trackers.Surely they entered into each agreement having costed the full mortgage from drawdown to paydown. Otherwise even with the knowledge of their experts ie accountants economists auditors consultants valuers etc they couldn’t cost their product to make a profit. I would be worried if any of these “experts in their fields” are being relied upon to bring these banks back to profitability.
    It would be similar to their customer using the argument of negative equity to try and reduce their repayments even though the customers income hasn’t reduced.
    There is no connection between tracker margin and the market collapse and subsequent events. The tracker was either priced wrong at inception or not.

  5. Sully at 12:25 pm

    Has the government no power whatsoever the banks , surely one would think the government can pass legislation to force the banks to cut its rate for existing customers. Why do we need a government when boi can do what they like ?

    • maire at 1:57 pm

      Correct..it’s a disgrace that we are still paying such high rates. The Government are not interested in helping mortgage holders.

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