Sunday 26 March 2017

BoI 'will resist pressure to cut its variable rate'

Photo: Getty
Photo: Getty
Charlie Weston

Charlie Weston

Bank of Ireland will continue to resist attempts to cut its variable rate.

This is despite TDs passing legislation that aims to give the Central Bank new powers to tackle high interest rates, in a move that will provide hope for 300,000 variable-rate customers.

The Fianna Fáil bill was reintroduced in response to a failure by many of the main lenders to pass on lower interest rates set by the European Central Bank (ECB).

But in a major new report on the banks from Davy Stockbrokers, analysts say that Bank of Ireland will resist political pressure to reduce its variable rate for existing customers.

It says AIB will reduce its variable rates to 3pc for all customers, while Permanent TSB will cut its rate to the same level for new customers.

Equity

There will be a reduction in the Permanent TSB managed variable rate, where existing mortgage holders get a reduction in rates based on the equity they have in their homes, by 0.25pc.

Davy, which acts as stockbroker to Bank of Ireland (BoI) and Permanent TSB, says the Richie Boucher-led bank will continue to face down the renewed pressure on it to cut rates.

The bank has one of the highest rates in the market at 4.5pc.

It has cut its fixed rates for new and existing customers, and will do so again, but not its variable rate, Davy says.

The broker said: "BoI has made only a marginal cut to its new variable rates and nothing for existing customers."

However, Davy analysts Emer Lang and Stephen Lyons said Bank of Ireland would not move on its standard variable rate (SVR).

"We assume over our forecast horizon that BoI does not decrease its SVR rate but that fixed rates reduce in order to maintain its existing share of 33pc [of the new mortgage market]."

AIB has made significant reductions to its variable rates for both new and existing customers. From next month the AIB variable rate is coming down to 3.4pc.

The broker reckons AIB's variable rate will fall to 3pc for new and existing borrowers.

Permanent TSB has made more modest cuts to its variable rates. Davy predicts its variable rate for new borrowers will fall to 3pc, from 4.5pc.

Irish Independent

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