Friday 24 November 2017

AIB, BoI customers hit 'on the double' as rates rise

Charlie Weston Personal Finance Editor

MORTGAGE holders will be hit with the second interest rate hike in 12 weeks today, but homeowners with variable rate loans from AIB and Bank of Ireland are being warned to expect "a double rise".

Variable-rate mortgage holders with the two lenders were spared when the European Central Bank last hiked rates in April.

A second rise of 0.25pc in European interest rates will be announced today, but AIB and Bank of Ireland are expected to hike their rates by more than that to make up for not passing on the first rise.

Today's rate rise will be passed on to all 400,000 homeowners who have tracker mortgages. It will add another €15 to the monthly repayments on every €100,000 borrowed.

Around 200,000 homeowners are on standard variable or loan-to-value variable rates.

The banks would only say yesterday that their rates were under review, but operations director of Irish Mortgage Brokers Karl Deeter said the two banks would now make up for not hiking variable mortgage holders in April.

"AIB and Bank of Ireland are set to pass on this latest rise, plus some extra. This means the only mortgage holders to escape will be those with fixed rates."

Rates are expected to rise by 0.25pc, the same percentage as in April. The cumulative effect of the ECB rate rises will increase monthly repayments on a €300,000 tracker mortgage by €90.

Anyone with a variable rate will have to be given 30 days' notice by their lender before repayments rise under new Central Bank rules.

Last month, the ECB held interest rates steady, but bank president Jean-Claude Trichet has since indicated a hike is on the way this month.

He said the bank will exercise "strong vigilance" on prices, using a phrase that in the past signalled a forthcoming rise.

Irish lenders have applied their own increases in the past few months, leading to further pressure on consumers.


All lenders passed the full 0.25pc rise from April on to tracker mortgage holders.

The same rise was passed on to variable-rate customers of Halifax Bank of Scotland, EBS/Haven and Permanent TSB. However, the Permanent TSB variable rate has now gone to 5.44pc -- the highest rate in the market.

In the past few months, variable rates have gone up by 0.65pc at Irish Nationwide and by 0.6pc in Ulster Bank.

KBC Bank pushed up its variable rate by 0.4pc at the start of last month. Sub-prime lender Start said the average rate across its variable-rate loans was around 5.4pc

Consumer sentiment last month recorded its lowest reading since February, with the potential for increases in mortgage payments playing a part in this.

Irish Independent

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