PTSB: Rates rise not ruled out

PERMANENT TSB has no immediate plans to increase its variable interest rates for mortgage customers — following its controversial 0.5% hike in July — but has not totally ruled out any such moves.

Addressing the Joint Oireachtas Committee on Finance and the Public Service, yesterday, the bank’s chief executive, David Guinane, said that while there is no plan for an increase, it could be looked at again if the bank’s cost issues continue unchanged.

Regarding the July rates increase, Mr Guinane remarked, yesterday: “We didn’t take that decision lightly and we understood the impact it would have on customers and we wouldn’t take a step to raise rates again any way lightly.

“It would be irresponsible of me to totally rule it out, but we have no immediate plans to make any further increases.”

When asked by the committee if the company — the biggest mortgage lender in the country — could look at raising its rates again in the next three to six months, Mr Guinane said it was hard to speculate on such time frames.

“If I was questioned six months ago, I wouldn’t have thought the July increase was likely,” he added.

Deputy Frank Fahey said it was worrying that Permanent TSB’s July rates rise could provide a precedent for it and other banks to raise rates.

“For the economy to recover, we need to keep sustainable interest rates and stay in line with the European Central Bank rate as much as possible,” he added.

Approximately 72,000 customers — about 38% of the bank’s total mortgage client base — are affected by July’s increase; meaning the majority 118,000 tracker mortgage customers are not. But, in terms of income, Permanent TSB is likely to take in around €24m in its current financial year on the back of the rates increase.

The bank gave as reasons for the 0.5% hike the fact that it had to make extra provisions in light of a rise in impaired loans — those which are unlikely to be repaid — and it having to pay “significantly more for the raw material of our business — money”, basically the increased costs of funding.

“The ECB provides us with about 30% of our funding at the moment, but it doesn’t set the cost of all the money banks like us need to borrow,” he added.