Let customers keep trackers if they move, Noonan tells banks
FINANCE Minister Michael Noonan has called on all banks to offer their mortgage customers full-term transfer tracker deals.
Mr Noonan heaped pressure on AIB to follow its competitors by introducing the scheme, which gives customers the option of moving home while keeping their low-cost tracker mortgages.
Permanent TSB last week announced that the new product will be available from May and will allow customers to keep their tracker rate for the full term outstanding. KBC Bank is set to follow Permanent TSB next month, but customers who avail of the deal will pay a slightly higher premium on the tracker rate.
Other institutions such as Bank of Ireland and Ulster Bank allow qualifying customers to transfer their mortgages. However, the deal itself lasts for only five years.
All eyes are now on AIB, which has not yet detailed what sort of tracker-transfer product it intends to introduce. The bank offers customers in negative equity the option to move house, but it does not allow them to keep their tracker.
Mr Noonan said the full-term deals offered by PTSB will particularly benefit apartment owners who later have children.
"It is a better deal. I would like to see it across the banking system," he told RTE radio.
"People are in apartments, for example, which they have mortgages on, tracker mortgages, once they have a second child, the place is too small. They must move to a variable mortgage to move out, so that nails them into an apartment that isn't suitable.
"If they were allowed keep the tracker on that portion of the mortgage that they have already, top it up then with variable, well that will give the opportunity to buy any kind of three-bedroom house that they aspire to (buy)."
Meanwhile, Mr Noonan reiterated his support for the prospect of a new viable bank being established.
He said that while he was not advocating for a "third banking force", he believes there is now space for greater competition.
"I'm sending a signal out to the European banking system, that a growing economy in Ireland has space for more banking activity and we would welcome their participation in Ireland by way of subsidiaries or by way of going into partnership with some of our existing banks," he said.
"Competition is the life of trade and the two big banks that we have been used to over generations – their balance sheets have got much smaller and their capacity to lend is much smaller than it was. And if you envisage an economy, which we think is going to grow at 2.5-3pc or more over the next five years, a lot of credit is needed," he added.
Mr Noonan said an alternative option to the creation of a third viable bank would be to "build up" PTSB.