Wednesday, February 22, 2012
The viability of AIB’s standard rate variable mortgage business is in jeopardy if the level of deposits in the bank don’t increase, according to head of AIB mortgages Jim O’Keeffe.
Speaking at an AIB mortgage breakfast seminar in Cork, Mr O’Keeffe said that AIB’s mortgage business was threatened due to the cost of funding.
"Funding costs have continued to increase due to the issues with wholesale funding," said Mr O’Keeffe.
He added that deposits had represented a significant source of funding for the bank, and unless these increased, it would not be viable to provide mortgages at current interest rates.
AIB is the cheapest mortgage provider in the country, with a loan-to-value rate of 3.24% for owner-occupiers over 20 years.
"For the standard variable mortgage business to continue as a viable business into the future, for all of us, that is a challenge. Over a period of time we are going to have to review that and we’re going to have to see does the deposit market begin to normalise, so that we can get to a position where the mortgage lending is a sustainable business," he said.
Mr O’Keeffe refused to rule out a mortgage interest rate hike. He said that AIB would be keeping interest rates under review.
He also stressed that AIB is open for new business, adding that Dec 2011 had seen the highest level of mortgage approvals in a number of years. Over €80m of mortgages had been approved. The strong growth had continued into January, when mortgage approval rates had risen 150% year-on-year.
© Examiner Publications (Cork) Limited, City Quarter, Lapps Quay, Cork. Registered in Ireland: 73385.
