Tuesday 6 December 2016

Central Bank puts pressure on PTSB to cut variable rates

Charlie Weston Personal Finance Editor

Published 18/02/2012 | 05:00

ONE of the largest mortgage lenders in the country is coming under intense pressure from the Central Bank to cut its 'sky-high' variable rate.

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Permanent TSB has the highest variable rate in the market, even after cutting it by 0.7pc in December.

Its rate of 5.19pc has been sharply criticised by opposition politicians, homeowners and consumer advocates.

Payments on a €300,000 variable-rate mortgage are €300 a month higher than for the same-sized home loan on a tracker rate with Permanent TSB.

The Permanent TSB rate compares with a 3pc variable rate at AIB.

Now the Central Bank has admitted it is applying pressure on lenders charging higher interest rates.

Regulators did not name Permanent TSB but said in a statement yesterday: "We are engaging with specific lenders who appear to have standard variable rates set disproportionately high compared with the cost of funds through our existing powers of suasion."

One borrower with Permanent TSB said he and his wife had bought their house in 2009. They now owe €293,000 on their mortgage.

Their variable rate with Permanent of 5.19pc means the monthly repayments are €1,647.

If the couple had the same mortgage with AIB the monthly repayments would be almost €400 cheaper at €1,264.

Research by regulators released recently showed that the average interest rate on variable rate loans across the market is roughly 2pc higher than the average interest rate on tracker loans.

But some lenders are charging 3pc more on variables than on trackers. Up to the end of 2008, the difference was almost zero between variable and tracker rates, the Central Bank research found.

Irish Independent

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