EBS piles on the pain for homeowners with its third rate increase
EBS has become the latest lender to heap pain on mortgage holders.
The bailed-out building society increased its standard variable interest rate by 0.25pc yesterday.
The new EBS variable rate will be 4.93pc (5.1pc APR) from October 1 even though the ECB rate is 1.5pc and unlikely to rise in the short term.
It is the third rise in the EBS variable rate this year.
The rate increased by 0.6pc in February and by another 0.25pc from August 1.
The latest move will further fuel fears that AIB is poised to raise rates on its massive mortgage and personal lending book -- as EBS is now part of the AIB group.
But a spokesman for the nationalised bank last night insisted that no decision had been taken on AIB's interest rates, which haven't risen to take account of this year's ECB rate hikes.
"It's still under review," the AIB spokesman stressed.
He declined to speculate on when a decision would be made.
EBS's hike, which will raise repayments by €15 for every €100,000 borrowed, comes just two weeks after the ECB voted to leave interest rates unchanged at 1.5pc.
In a brief statement yesterday, EBS retail chief Dara Dearing said the building society's higher rates "reflect the continued increase in the cost of funds to the business".
Irish banks have been frozen out of money markets since last autumn, leaving them almost entirely reliant on the ECB for funding. This means every rise in ECB rates immediately impacts on the cost of funding for Irish banks, including both AIB and EBS.
When asked why EBS had raised its rates when AIB hadn't, a spokesman for the building society stressed that EBS was "operating as a stand-alone subsidiary".
Several other banks, including Permanent TSB and Bank of Ireland, have already upped their interest rates several times this year, reflecting the ECB hikes in April and July and other pressures.
However, the future looks somewhat brighter for mortgage holders, since most market watchers believe the chances of further ECB increases this year are extremely unlikely given that the global economy is teetering on the verge of a recession.
But Irish borrowers could still come in for more pain, as banks struggle to become more profitable and attractive to potential investors.