The State-owned bank will now offer a managed variable rate of 3.76% for new customers with a loan-to-value of less than 50%, which is a 0.36% decrease on the existing rate. The new rate will come into effect on January 12.
For customers with a loan-to-value of 70%-80%, there will be a 0.42% cut in the managed variable rate to 4.07%. The bank will apply different interest rates according to the size of the loan-to-value ratio of the mortgage.
For example, a loan-to-value of 80%-90%, the annual percentage rate will be 4.28%, which is a 0.41% decrease on the current rate. Moreover, the cuts will apply to all existing customers with managed variable rate loans.
However, rates for customers on tracker, fixed rate, or standard variable rate mortgages will remain the same. There will also be changes to PTSB’s fixed rate offerings.
Also from January 12, there will be fixed rate mortgages for four-year terms, compared to a current maximum of three years.
“We have grown our market share to 13% over the past two years and we are determined to continue that momentum into 2015,” said Richard Kelly, head of mortgages at Permanent TSB.
“These new rates show that Permanent TSB is bringing real competition to the mortgage market and we will continue to provide mortgage credit to those customers who demonstrate affordability and are credit worthy.”
Last October, AIB announced it would cut its standard variable rate mortgage by 0.25% to 4.15%. When the banks appeared before the Oireachtas Finance Committee over the first two weeks in November, Fianna Fáil finance spokesman Michael McGrath claimed Irish mortgage rates were much higher than the rest of the EU.
Bank of Ireland chief executive Richie Boucher told the committee he had no plans to lower mortgage rates. There was a significant liquidity risk of offering credit over a 25-year period and this had to be reflected in the margin a bank earned over that timeframe, he added.
Last week, Mr McGrath wrote to ECB president Mario Draghi highlighting the high costs of Irish mortgages.
In a written response, Mr Draghi said: “The ECB does not interfere in the normal activity of commercial banks in pricing loans.”
Mr McGrath said more action had to be taken. “While attention is often focused on the availability of credit, the biggest issue for SMEs is often the prohibitive cost of bank borrowing,” he said.
“National central banks, who in effect implement ECB policy at a local level, have potentially very strong powers of persuasion on these matters. If interest rate cuts and other actions are not resulting in a real reduction in the cost of credit, they are not having the full impact that is intended.
“The ECB together with the Irish Central Bank need to look again at how its policies and feeding through to families and consumers,” he added.
Permanent TSB was the only Irish bank to fail the ECB’s stress tests. It has submitted a plan to raise capital over the next nine months to comply with the new regulatory standards.