Lenders peg rates until mortgage row abates
Madelaine Johnansson and James O'Toole, from the People Before Profit Alliance, protesting yesterday against the interest rate increases by the Permanent TSB outside a branch office on O'Connell St, Dublin
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Mortgage lenders are likely to hold out for a few months for the furore to die down over Permanent TSB's controversial rate hike before following suit, according to industry sources.
More than 50,000 of the bank's mortgage customers were hit in the pocket yesterday as its 0.5 percentage point hike of its variable interest rate took effect.
It was marked by a small protest, led by the People Before Profit Alliance, outside the bank's O'Connell Street branch in Dublin, where picketers held up placards saying: "We don't pay for the greed of the Super Rich" and "Sack This Government".
Several other lenders are now preparing to follow suit following the Government's apparent about-turn on its previous campaign to get State-guaranteed banks and building societies to keep the pressure off cash-strapped homeowners.
Karl Deeter, operations manager with Irish Mortgage Brokers, said it is only a matter of time before other lenders start jacking up rates.
"The banks will bide their time. They won't want this issue to gain enough political and social traction for it to turn into a strong movement against them raising rates," said Mr Deeter.
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"Permanent TSB's increase has only affected 50,000 people -- less than 1pc of the population. If 4, 5 or 6pc were hit at once, it'd give a campaign vital mass," he said, adding that it may be as late as the final quarter of the year before others do the same.
Other State-guaranteed lenders have all said that they are monitoring their rates, but none has indicated that it is preparing to follow Permanent TSB's lead.
The move by Permanent TSB, a unit of Irish Life & Permanent, to increase its variable rates has sent the affected customers' monthly repayment up €14.75. This is based on an average affected mortgage standing at €62,500, with 13 years left to run.
It adds more than €70 a month to a typical €300,000 mortgage of recent years -- wiping out the effect of two recent European Central Bank rate cuts.
The move, which brings its rates from 2.69pc up to 3.19pc, came as the bank's interest margins are being squeezed amid strong competition for deposits and higher wholesale market funding costs.
Experts say other loss-making banks will wait for the public furore over Permanent TSB's move to die down before making their move. Finance Minister Brian Lenihan said while he was "disappointed" by the bank's decision, the increase "reflects commercial market realities, including the increased cost of accessing funds".
- Joe Brennan
