Tuesday 16 January 2018

Bank of Ireland to raise lending rates on loans and overdrafts

Hike comes after State takes 16pc stake

Charlie Weston Personal Finance Editor

BANK of Ireland (BoI) is increasing a string of its lending rates just three days after the taxpayer took a 16pc stake in the lender.

The bank is set to raise the interest rate it charges its customers on overdrafts, personal loans and student loans.

At the same time, it is to cut the interest it pays to customers who remain in credit on their current accounts.

BoI has more current accounts than any other bank in this market with a 38pc market share, according to London-based analysts at Societe Generale.

Earlier this week the State ended up with a 16pc stake in the bank after BoI was blocked by the EU Commission from paying a dividend to the Exchequer in return for €3.5bn of taxpayers' money which had been pumped into the bank.

Instead, the dividend was converted into shares.

The leading bank is hiking the interest rate it charges personal customers for an overdraft from 13.7pc to 14.8pc.

This figure includes the €25 fee for setting up an overdraft facility.

For anyone who ends up overdrawn but who does not have permission to do so there is an additional penalty interest rate charge of 7.2pc.

This means an unauthorised overdraft will be subject to interest of 22pc.

The new higher rates take effect from April 28 next.

Also rising are the personal loan rates, from 12.4pc to 13.5pc (annual percentage rate).

However, for amounts of €10,000 the rate rise is lower. The new rate will go from 11.9pc to 13pc, while for €15,000 the interest rate goes from 11.7pc to 12.8pc.

The third-level student loan and overdraft rates will both rise from 10.8pc to 11.9pc, while the graduate loan and overdraft rates will go up from 8.7pc to 9.7pc.

The interest paid on current accounts falls from 0.75pc to 0.25pc.

This fall only applies to amounts up to €1,500, provided the customer registers for online or phone banking and makes at least three debits a month from the account.

The bank said in a statement: "These rate changes are driven by the ongoing costs associated with the provision of these products.

"Bank of Ireland is a leading provider of consumer lending to Irish consumers and this decision was taken to ensure the bank maintains its commitment to support customers in an economic downturn and continue to provide competitive products."

A number of banking analysts have predicted that banking charges, fees and interest rates will spiral this year as lenders seek to stem their losses from commercial loans.

Investment bank Societe Generale said this week that profit margins on banking products in this market would almost double in the next while.

Irish Independent

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