NIB bucks trend on mortgage rate cuts

EBS has joined Permanent TSB, KBC and the former Irish Nationwide in passing on the full 0.25% cut in interest rates announced by the ECB.

However, Bank of Ireland, Ulster Bank, AIB — which is 99.8% state-owned — and Start Mortgages have yet to decide whether to follow suit, while the Danish-owned National Irish Bank has confirmed it is to increase from Friday its rates by almost 1%, adding €100 a month to a standard €200,000 mortgage.

NIB has sought to justify its stance on the grounds that it does not rely on the ECB for funding and, therefore, changes in its interest rates are not related to any ECB interest rate fluctuations. It says it is funded through its parent company Danske Bank. NIB’s variable rates will be increased by between 0.2% and 0.95%, to bring them to between 4.35% and 4.6%.

Financial Regulator Matthew Elderfield has conceded that he has no powers to compel lenders to pass on the benefits of interest rate cuts.

In the wake of the decision by NIB, Taoiseach Enda Kenny warned that he will consider introducing legislation to force lending institutions to pass on ECB reductions, while Finance Minister Michael Noonan has insisted that banks give the benefit of any rate reductions to customers.

The EBS is to reduce its standard variable rate, becoming the latest financial institution to follow the lead of the European Central Bank which announced a rate cut last week.

EBS said yesterday that it is to reduce its standard variable rate by 0.25% from 4.93% to 4.68% (4.8% APR) from December 1.

This morning, National Irish Bank said it had given its customers one month’s notice of an increase in its variable mortgage rates, which comes into force on Friday.

Permanent TSB, KBC and former Irish Nationwide have already announced that their customers will benefit from the decision by the ECB.

Bank of Ireland, Ulster Bank and AIB have all said their mortgage rates are under constant review, but they have not yet disclosed whether they will pass on the cut.

Start Mortgages, a subsidiary of the Kensington Group, has yet to indicate whether it will pass on the ECB rate reduction or any part of it.

Mr Noonan last week said that banks must pass on the full interest rate reduction to customers.

Mr Kenny has also indicated he was prepared to consider introducing legislation to compel banks to adjust their rates accordingly.

His comments came after the Central Bank said it would expect all banks and building societies that increased rates in line with the ECB rates to pass on reductions to borrowers as well.