COMMENT: Bank was cynical in timing its rise
Published 30/04/2014 | 02:30
FEW institutions are as cynical as banks. Permanent TSB choose the day two former Anglo Irish bankers were due to be sentenced to announce a mortgage rate rise.
The timing smacks of bank bosses thinking it was a good day to bury bad news.
And it is not as if the bank's move to increase the variable rate for its 70,000 existing borrowers could be justified on the basis of the cost of lending for banks.
The ECB rate is at an all-time low of 0.25pc. The rate may even go lower later in the summer. But more importantly for banks, the interest rate at which banks lend to each other has dropped like a stone in the last few months. This Euribor rate fell by 1pc alone recently.
The real reason Permanent TSB raised its variable rate is because it can. It is stuck with thousands of tracker rate mortgage holders that it is losing money on, and cannot move their rates unless the ECB rate changes.
So it hits the suckers with variable rates as a way to make up for this banking mess of its own making. The fear now is that other banks will follow with similar rises, getting in before there are any further cuts in the ECB's eurozone rate.
In the last two years the big two of AIB and Bank of Ireland have both pushed up their variable rates.
There have been so many hikes in variable rates, at a time of record low tracker rates, that the gap between the repayments on a variable and a tracker for the same sized mortgage is now €400 a month. Rather than a new series of rises, variable rate holders deserve a cut in rates.