Interest rates on hold ‘for now’

PERMANENT TSB will not raise its mortgage interest rates any further before the summer months, but is likely to review them again around that time.

The company has raised its standard variable mortgage rates by 0.5% on two occasions inside the last 12 months – last July and in February of this year – bringing the rate to 3.69%.

Speaking yesterday, Irish Life & Permanent (IL&P) chief executive Kevin Murphy said that the previous rate hikes were difficult decisions but ultimately reflected the cost of raising deposits in Ireland today.

He added that the group’s banking arm was not currently planning to introduce a third rates increase and wouldn’t be reviewing rates again “until the middle of the year”.

Mr Murphy’s comments came on the back of IL&P’s annual results – showing the group going from an operating profit of €341m in 2008 to a loss of €196m in 2009. Permanent TSB, alone, posted an operating loss of €270m last year.

IL&P also reiterated, yesterday, that no developments on the formation of the so-called “third force” in Irish banking, or a merger between it and the NAMA-associated EBS and Irish Nationwide Building Society are likely until the second quarter of this year, when first loan transfers to the Government’s “bad bank” project are completed.

IL&P – given its lack of property-based loans – is not transferring any assets to NAMA.

The group recently completed its restructuring under a new holding company – Irish Life Group Holdings – which separately owns Irish Life and PTSB, therefore making it easier for the latter to merge with outside entities.

“There will be significant restructuring of banking in Ireland and we want to position the group to fully participate in that. We’re optimistic that clarity on this issue will be established over the coming months,” Mr Murphy added.

IL&P also confirmed, yesterday evening, that it has raised €2bn in fresh financing, through the issue of a new public fixed-rate bond.