What state ownership of IL&P will mean for you
THE State looks set to take majority ownership and full control of Irish Life and Permanent (IL&P) following the stress tests of banks. So, what effect will this have on customers?
Q. I have a mortgage with Permanent TSB. What will happen if the State takes control of the company?
A. Nothing in the short term. You will still have to make your agreed monthly repayments, whether you have a tracker, variable or fixed-rate mortgage.
However, the move might actually be good for mortgage customers. This is because the lender has been very aggressive in pushing up standard variable rates and fixed rates for its customers.
Earlier this year the lender imposed a full 1pc hike in the variable rate for existing customers, pushing the rate to 5.19pc. This is one of the highest in the market.
It has also closed off the option for fixing for existing customers.
Being state controlled might mean the lender is less inclined to push through such aggressive mortgage hikes.
But you will still have to meet your repayments, and the best advice is to contact the bank if you are having trouble paying your residential mortgage, or your buy-to-let mortgage.
Q. I have savings with Permanent TSB. Will I be impacted?
A. The development will have no effect on depositors. Depositors will continue to be covered by the State guarantee.
The bank has some very high deposit rates. Its Interest First account pays 3.32pc for amounts over €10,000. The money has to be left on deposit for six months and the interest is paid in advance.
Q. I was an Irish Nationwide customer whose account was transferred to Permanent TSB. What is my situation?
A. Permanent TSB took over 160,000, mainly retail, deposits from Irish Nationwide. It said it would honour the terms and conditions of the savings accounts that had been placed with it.
The State will now ensure those conditions are honoured.
The Government said at the time of the transfer last month: "Customers of Anglo and Irish Nationwide Building Society should be reassured that their deposits remain protected under existing government guarantee arrangements."
Q. What does State control mean for shareholders of Irish Life & Permanent?
A. The news is bad here. Shareholders will get wiped out, basically. A rump of the shares in issue will likely still be listed on the Irish Stock Market, but they will be essentially worthless.
When Anglo Irish was nationalised at the start of 2009 the then-Government talked about compensating shareholders, but nothing has happened since.
Q. I have a life policy with Irish Life. Is it safe?
A. Irish Life is healthy despite the challenging economic climate. The Central Bank regulates insurers in Ireland, and the solvency standards are driven by European Union regulations.
There is no suggestion that Irish Life's solvency is a problem. Your policy should be fine.
The life company has been pulled down by the loss-making bank. This is essentially because the banking arm, Permanent TSB, is losing €380m a year on tracker mortgages.