BoI says clients can take rate hike

Bank of Ireland believes some 60,000 hard-pressed mortgage holders have adequate finances to absorb another 0.5% increase in the standard variable interest rates.

Head of communications Daniel Loughrey said the bank believes that mortgage holders have enough money to pay the extra 0.5% — €1,000 a year for those who took out €300,000 mortgages.

“We have stress-tested our customers and our analysis suggests that the customers will be able to pay their mortgages,” he said.

The move by the bank to increase its mortgage rate will take effect from Oct 5 for existing customers while new customers will be hit from this Friday, Aug 31.

More than 60,000 homeowners will be hit by the higher interest rates of 4.8%, while an unspecified number of buy-to-let owners will also see their mortgage repayments increase as the rate rises.

Residential customers taking out a new mortgage from Friday will face rates of up to 4.8% at ICS, the building society controlled by Bank of Ireland.

New buy-to-let customers will face variable rates as high as 5.95% at ICS.

Bank of Ireland defended the decision to increase the rate as the cost of its credit had grown recently.

“The reality is that the cost of funding has increased and we envisage that it will remain higher. We have to deal with this as a business. Basic business is cost of material plus a margin. The cost of our raw material has gone up,” Mr Loughrey said.

AIB customers are also facing higher rates as the interest rate increase the bank announced in July will take effect from early next week.

AIB’s standard variable rate for residential mortgages will rise from 3% to 3.5% and for buy-to-let mortgages it will increase to 4.45%.

AIB said no further increases are planned in the near future. A spokeswoman said: “We currently have no plans to increase standard variable rates. As with all AIB deposit and lending rates they remain under constant review.”