Kenny warns banks to pass on rate cuts
Published 06/11/2011 | 05:00
Taoiseach Enda Kenny has issued a warning to banks and other lenders that they must pass on the European Central Bank (ECB) interest rate cuts to householders.
He warned them that if they did not pass them on voluntarily, the Government would tell Financial Regulator Matthew Elderfield to force them to move on interest rates.
The Central Bank has also stepped up pressure on lenders to pass on the ECB rate cut to all variable mortgage borrowers.
The decrease in the ECB rate will see the cost of a typical €250,000 tracker mortgage fall by about €32 a month.
Last Friday Mr Kenny issued a carefully worded warning to financial institutions. He said: "Some months ago Matthew Elderfield recommended that the decrease would be passed on to mortgage payers. The regulator has said that if this is not followed through that he may seek legislative assistance from the Government and if the regulator comes before us with his requirement, obviously the Government will consider that in the interests of the many people who are distressed by the concerns arising from their mortgages.
"I do hope that the interest rate reductions are passed on to consumers."
Permanent TSB and KBC have confirmed they will be giving consumers the 0.25 per cent rate cut announced by the ECB last Thursday.
The cut by Permanent TSB will benefit about 175,000 customers, including some 86,000 on standard variable rates.
The IBRC bank created by the merger of Anglo and Irish Nationwide has also reduced its variable interest rate to reflect the ECB rate cut.
AIB, which is almost fully owned by the taxpayer, Bank of Ireland and Ulster Bank all declined to say whether their customers would benefit from the reduction.
Allied Irish Banks said its variable lending rates were under "constant review".
The Central Bank confirmed that while it did not have the power to force lenders to cut interest rates, it had called on institutions to stop applying rate increases that went beyond the cost of funds if they wanted to avoid new regulations in the area.
The Central Bank added that where lenders had previously increased rates to follow ECB actions, the Central Bank would expect all lenders to similarly pass through any ECB rate reductions to all borrowers, particularly where the lenders' cost of funds have reduced as a result of the ECB decision.