Mortgage holders to be hit by all main banks

HOMEOWNERS can expect the main banks to follow Permanent TSB’s lead and hike interest rates, pushing up the cost of mortgages for thousands struggling to meet monthly bills.

Chief executive of the Irish Banking Federation Pat Farrell said he has no doubt other lenders will find themselves in the same situation as Permanent TSB, which hiked rates by 0.5% last week.

“We have to get to a situation where banks can rebuild their balance sheets. That’s in everybody’s interests, including their customers,” he said.

He added banks are losing money on their mortgage books and this would create even bigger difficulties for the taxpayer.

“It is an unfortunate fact of life but it has to be faced up to,” he said.

Yesterday, Permanent TSB increased rates on standard variable rate mortgages by 0.5%. The move will mean an extra €57.29 per month on a €200,000 mortgage.

Homeowners on tracker mortgages are also facing the prospect of higher rates, with analysts saying the European Central Bank could hike rates towards the end of the year.

Mr Farrell also confirmed that there will be no legal proceedings where a borrower engages with their lender.

This follows a Government announcement that it is setting up a system to protect mortgage borrowers who have fallen behind in their payments from having their home repossessed.

Around 3.3% of Irish mortgage borrowers are at least 90 days behind in their repayments.

The Government is setting up a panel of experts to advise it on how to deal with the growing number of people failing to meet mortgage repayments.

Education Minister Batt O’Keefe said the Government is looking at this proposal: “We do feel we owe something to people who are hard pushed at the present time to meet repayments.”

Meanwhile, homeowners have been advised to consider fixing their mortgages now to take advantage of record low interest rates.

However, fixed rates on offer at some banks means it makes no sense for customers to switch, according to the managing director of the Irish Mortgage Corporation, Frank Conway.

He said Bank of Ireland, AIB and EBS are offering two-, three- and five-year fixed rate deals for between 2.85% and 4%.

“Bank of Scotland customers could face a rate of 7.25% on their three-year, fixed-rate deal and 7.75% on their five-year, fixed-rate deal, so in this case, keeping their standard variable rate may be a better option.”


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