Lenihan suggests Govt won’t block interest-rate hikes

Finance Minister Brian Lenihan appears to have ruled out government intervention to prevent Permanent TSB from increasing mortgage interest rates.

The bank is planning to increase its standard variable rate by half a percentage point, blaming the high cost of funds, rising deposit rates and tight margins.

Around 50,000 customers will be affected by the move and there are fears that other banks will quickly follow suit.

SIPTU has described the hike as immoral as it will dampen consumer confidence and further damage the economy at the same time that taxpayers are propping up Irish banks via the State's deposit guarantee.

The union has demanded that the Government threaten to remove the guarantee from any bank that raises interest rates.

However, Minister Lenihan said today that, while he was disappointed with the move, it reflected commercial market realities.

He said withdrawing the state guarantee would only lead to even higher costs for mortgage-holders.