Bank of Ireland won’t take mortgage rate ‘risk’

Bank of Ireland looks set to resist pressure to cut its most expensive mortgage rates despite growing political pressure and significant moves by its biggest competitor earlier this week.

The lender appears unlikely to cut its standard variable rates despite moves by AIB to gain a greater share of the mortgage market by offering cheaper loans to customers.

On Monday, AIB cut its standard variable rate for new and existing mortgage holders by 0.25% making some of its mortgage products up to 1% cheaper than Bank of Ireland’s.

Analysts said the rate reduction made Bank of Ireland’s product offerings look “very unfavourable”, while Davy Stockbrokers bank analyst Emer Lang said matching AIB could cut €20m off the bank’s operating profit this year.

The government yesterday also renewed its commitment to take “all necessary action” to tackle exorbitant Irish mortgage rates, as originally reported by the Irish Examiner, with the publication of the Programme For Government.

Bank of Ireland chief executive Richie Boucher said the lender would continue to focus on its fixed rates rather than prioritising standard variable rate loans, however.

“What we do is we run our business the way we think is best and we have a focus on fixed rates,” Mr Boucher said.

He added the bank keeps all its rates under review at all times. Mr Boucher said its focus would remain on its fixed rate products as it believes the Irish mortgage market is particularly vulnerable to variable rates.

“We don’t take interest rate risk and we think the Irish market has a high risk to variable rates. If you look at the structure of the Irish market, compared to any other economy or any other mortgage market, the emphasis is on fixed rates [outside of Ireland] so we put our emphasis on fixed rates.”

In addition to the agreement for government struck between Fine Gael and the Independent Alliance which stated it is “not ethically acceptable for Irish banks to charge excessive interest rates on standard variable rates”, both Fianna Fáil and Sinn Féin have signalled their intent to take a hard line on standard variable rates.

Fianna Fáil, which has agreed to support the minority government, said it intends to introduce legislation “at the first opportunity” to provide the Central Bank with powers to persuade lenders to cut the rates they charge Irish homeowners.

Mr Boucher said the bank would deal with any new powers the Central Bank was given if and when that happened.

Meanwhile, Silicon Valley Bank yesterday said it expects to deploy an additional $100m over five years to support Ireland’s technology and life sciences business, in collaboration with the Ireland Strategic Investment Fund.


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