Just 4 banks will pass on rate cut in full

JUST four of the nine main banks and building societies have said they will pass on yesterday’s ECB interest rate cut in full to their variable mortgage customers.

AIB, which eventually caved in and passed on last month’s cut after a week of pressure from the Government, is giving little indication it is open to influence this time, stating that its variable rate “is unchanged” despite the ECB’s announcement of a 0.25% base rate reduction.

Ulster Bank and National Irish Bank, which resisted the pressure last month, have no plans to give in this time either, although they said they would keep the matter “under review”.

KBC Bank, which did pass on the previous cut, is also adopting an “under review” approach, but Bank of Ireland, which also refused last time, has made a partial concession, reducing its variable rate by 0.15%.

All lenders automatically pass on the 0.25% cut to customers on tracker mortgages — about 400,000 — as they are directly linked to ECB rates. But those going the extra distance to include the country’s 200,000 variable mortgage customers include Permanent TSB, Bank of Scotland Ireland and Irish Nationwide Building Society, which is now part of the Irish Bank Resolution Corporation.

EBS, which has been merged into AIB, has gone further by announcing a cut of 0.35% in its variable rate, although that still leaves the EBS rate at one of the highest levels in the market.

AIB did have some additional good news for its customers, however, announcing a reduction of 0.6% in the interest rates on standard overdrafts for both personal customers and small businesses.

The ECB rate cut brings the base rate to 1%, the lowest since the eurozone was created, and it is widely expected another 0.25% cut will follow in the new year.

Each 0.25% cut represents a saving of €13-€15 per month for each €100,000 borrowed and yesterday’s announcement comes as a welcome relief for hard- pressed homeowners hit by VAT increases and new household charges after this week’s budget.

In making the cuts, the ECB has a broader aim of boosting the eurozone economy as a whole at a time when it is slipping into recession. As part of that strategy, it also announced measures to increase availability of loans within the banking sector which should have the knock-on effect of improving access to credit for individuals and business customers.