Friday 24 March 2017

AIB 'no' to mortgage rate cut despite Gilmore warning

ECB president Mario Draghi. Photo: Getty Images

STATE-owned AIB said today it will not pass on the European Central Bank mortgage rate cut to variable customers, despite a warning from Tanaiste Eamonn Gilmore that they must.

The European Central Bank has cut interest rates for a second month in succession – by a quarter of a percent.



The ECB reduced its base rate of 1.25pc to 1pc.



This means that holders of the typical tracker mortgage of €300,000 will be better off by about €30 per month.



Banks must pass on the cuts to tracker mortgage holders, but not to rate mortgage holders.



However, EBS, which is now part of AIB, will reduce its variable rate by 0.35 points.



AIB says its mortgage portfolios are currently loss-making and that this is undermining the prospect of a future return to Irish taxpayers.



The Bank of Ireland has, in a compromise, said it will cut its variable mortgage rates by 0.15 points.



The bank did not pass on November's quarter-point rate cut.



In a statement, BOI it said its funding costs remained high and it would keep rates under review.



Earlier Mr Gilmore pledged to challenge Irish banks if they failed to reduce their mortgage interest rates in line with the cuts.



"This Government will act decisively, forcefully and effectively with the banks and anybody else in the interests of those who hold mortgages and are having difficulty repaying them," said Mr Gilmore.



"When the last decrease occurred, the Government called in the banks. If necessary we will do that again," the Tanaiste went on.



Mr Gilmore said he was hopeful the banks would pass on the rate, but Sinn Fein TD Pearse Doherty said hope was not enough.



"You are in power, you have the power to cut social welfare rates, to cut child benefits," said Mr Doherty.



"You also have the power to instruct the banks to pass on this rate. So act in the public's interest."



Mr Doherty called for the Tanaiste to guarantee to mortgage holders that the Government will bring in legislation forcing banks to pass on the ECB rate.



Mr Gilmore said the Government would take action.



"When you say for example that we've abandoned the people who are in mortgage difficulties, you fly in the face of the truth," he added.



Mr Gilmore also said today that the Government may have to call a European referendum.



The Tanaiste told the Dail that if a poll was necessary ‘’to save our currency and restore our economy’’ then we should not be afraid to put that choice to the Irish people’’.



He made the contribution during a Dail debate on the Euro crisis.



Shane Ross TD had earlier table a motion which argued that moves towards fiscal union would inevitably mean the end of our low corporate tax rate.



And he said comments from Herman van Rumpouy, the European Commission chairman, indicated that democracy would be ‘’by-passed’’.



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