Banks silent on passing on ECB rate cut

Banks are refusing to state if they will pass on the latest interest rate cut to struggling homeowners.

As the ECB cut the rate by 25 basis points to a record low of 0.5%, Bank of Ireland, AIB, Ulster Bank, KBC Bank, and IBRC, all refused to give a commitment to pass it on to variable rate mortgage holders.

Those lucky enough to be on tracker mortgages will see their repayments fall again by €15 a month per €100,000 borrowed.

Since 2011, a tracker mortgage of €300,000 has fallen by €180 a month following three consecutive interest rate cuts. However, the last time banks passed on cuts to variable mortgage holders was in Nov 2011, and that was after intense political pressure.

Last week, AIB announced a 0.4% hike on its rate, which will come into effect on Jun 5.

Dermott Jewell of the Consumers’ Association said it was unlikely banks would pass on the latest cut.

“They are now unapologetically taking care of their own business. You can tell from the posture that it is unlikely that they will pass it on. They won’t do it as they don’t see a need to be competitive. They really, really are very averse to passing it on.”

The Department of Finance has ruled out interfering with the banks’ commercial activities and forcing them to pass on savings.

A spokesperson for the department said there was no role for the department in the day-to-day operations of banks.

“Decisions relating to the setting of interest rates are a commercial matter for the management and boards of the respective banks.

“Neither the Central Bank nor the Department of Finance has a statutory function in relation to interest rate decisions.

“The relationship frameworks set out that the State will not intervene in the day-to-day operations of the banks or their management decisions. This includes pricing and lending decisions.”

Sinn Féin spokesman on finance, Pearse Doherty, said AIB was benefiting from the rate cut while penalising its customers with higher rates.

“The announcement from the ECB is welcome but it will be meaningless if the banks do not follow suit and pass on the cut to their customers. The onus is now on the Government to ensure that Irish banks pass this cut on to mortgage holders.

“AIB announced an increase in its variable interest rate to come into force next month. This bank is outrageously trying to have its cake and eat it by availing of an ECB rate cut while increasing its own rate.

“This is a state-owned bank and the Government needs to stand up for struggling mortgage holders by forcing it into line.”

What has developed here now is a two-tier mortgage crisis with those on tracker mortgages better off than the variables, according to Fianna Fáil finance spokesman Michael McGrath.

“We have a two-tier mortgage market, there are people with trackers with arrears, but there is a growing diversion between trackers and variable rate repayments. The banks are losing their shirts on trackers. We were led to believe that there was a proposal to warehouse the trackers but that doesn’t appear to be going anywhere.”


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