Permanent TSB is keeping interest rates 'under review' ahead of next ECB rate hike

'We’ve made no decisions on raising rates,' said Permanent TSB chief executive Eamonn Crowley. Photo: Sam Boal/Rollingnews.ie

Permanent TSB confirmed it is keeping its interest rates under review ahead of the ECB’s next rate hike scheduled for Thursday.

Analysts predicted the ECB would raise interest rates by another 0.75% on Thursday to try and stifle inflation.

“We’ve made no decisions on raising rates,” said Permanent TSB chief executive Eamonn Crowley.

Mr Crowley made these comments at a Cork Chamber breakfast event, attended by businesspeople across the county.

“We’ll just keep an eye on what’s happening at the ECB,” he added.

AIB was the first retail bank in the Republic to pass on the impact of the ECB rate hike to customers. It recently announced it would raise its fixed-rate mortgage products by 0.5% across its AIB, EBS and Haven brands.

Bank of Ireland and Permanent TSB have been able to absorb the ECB hikes so far, but more rate raises are planned for the rest of the year and early 2023, putting pressure on banks.

Analysts expect the ECB interest rates to peak between 3% and 3.25% before next summer. Mr Crowley is more optimistic and expects them to peak about 2% or 2.25%.

'Low interest rate era at an end'

“We’ve clearly entered a new phase in the interest rate cycle and the low interest rate era that we’ve been living through is at an end,” he said.

For the up to 300,000 tracker mortgage accounts, ECB interest rates peaking at 3%, the average tracker mortgage rate could rise to 3.75% and as much as 4%, after taking into account the margin charged by the bank, Michael Dowling, a senior mortgage broker, previously told the Irish Examiner.

Banks can absorb some of the ECB increases for 250,000 people on fixed-rate mortgages, but Mr Dowling said "there is no question that fixed rates will be rising".

Mr Crowley said he was not seeing evidence of customers struggling to pay mortgage and debt payments right now but was aware of anecdotal evidence in the media that suggest otherwise.

Meanwhile, as Permanent TSB and Bank of Ireland stave off raising rates for now, they are also growing due to the KBC and Ulster Bank exits from the retail banking market in the Republic.

“We’re now approaching the final stages of completing the acquisition of about €7.5bn of mortgages, as well as SME loans, and 25 branches from Ulster Bank,” said Mr Crowley.

Permanent TSB is increasing its mortgage book by 40% and tripling its SME lending business compared to 2020 figures, on the back of the Ulster Bank exit.

Mr Crowley said his bank planned to preserve existing jobs while also hiring 400 Ulster Bank staff.

In Munster, Permanent TSB has been doubling its activity levels year-on-year and has secured new business in various sectors including manufacturing, engineering, healthcare, retail and hospitality.

“My strong view is that the market will remain very competitive, and banks that do not compete at the very best of their ability are taking a very large risk,” said Mr Crowley.