Tuesday 20 February 2018

Banks snub request to cut rates on home loans

Bank of Ireland boss Richie Boucher (centre) leaves Government Buildings with two advisers after meeting officials. Photo: Mark Condren
Bank of Ireland boss Richie Boucher (centre) leaves Government Buildings with two advisers after meeting officials. Photo: Mark Condren

Charlie Weston Personal Finance Editor

THREE leading lenders delivered an uncharacteristic snub to the Government yesterday when they refused a direct request to cut their mortgage rates.

Ulster Bank, Bank of Ireland and AIB all refused when asked by the Taoiseach, Tanaiste and Finance Minister Michael Noonan to lower their variable rates.

It is estimated that up to 100,000 variable rate customers are affected by the refusal.

Financial experts said last night that the three banks had called the bluff of the Government and the Central Bank regulator Matthew Elderfield. The Government will have to bring in legislation to force the issue, or risk a major climbdown.


Last week, the European Central Bank cut its main rate by 0.25pc, with five lenders passing this reduction on to variable rate customers.

The heads of the Government met the bosses of the three banks in face-to-face meetings yesterday, but were rebuffed.

"Each of the banks stated, for different reasons, they did not intend to pass this rate reduction to their variable rate mortgage customers," a spokesman for the Department of Finance said.

So far Permanent TSB, KBC Bank, Irish Nationwide, Bank of Scotland/Halifax and EBS have passed on last week's eurozone rate cut.

But Danish-owned National Irish Bank is not only refusing to pass on the ECB decrease, it is to go ahead with a hike in its variable rate of almost 1pc tomorrow.

The rate reduction will lower monthly repayments by €15 for every €100,000 borrowed.

Taoiseach Enda Kenny spoke to Financial Regulator and deputy Central Bank governor, Matthew Elderfield, and said the Government would support any call for new legislation.

The Government said any "further support he (Mr Elderfield) requires from the Government in his dealings with the banks will be forthcoming".

A spokesman for Mr Elderfield said the Central Bank had no comment on whether regulators would seek changes to legislation to force banks to pass on ECB rate cuts.

Bank of Ireland chief executive Richie Boucher refused to comment on the interest rate issue, other than to say that the meeting had been productive.

Mr Kenny said he expressed the "disappointment" of the Government to the banks but didn't mention any threat to cut bankers' pay at the meeting.

The bankers will be brought back to another meeting in January to discuss progress on the promise to lend €3.5bn.

"The Government has got to consider the personal insolvency bill as to whether you include mortgages in that personal insolvency bill," Mr Kenny said.

"(We) are very concerned about this. Insofar as the legislation referred to is concerned, if the regulator comes and says, 'I need enhanced powers or greater authority in this area', the Government will respond to that," he added.

The State pumped €3.5bn into BoI in 2009, much of which it has since got back. Taxpayers currently own 15pc of the bank.

Ulster Bank is owned by Britain's Royal Bank of Scotland, but is regulated by the Irish Central Bank.

It denied yesterday it had snubbed the Government and would only say that it was keeping it variable rate under review.


Ulster Bank has one of the highest variable rates in the market at 4.95pc.

AIB ruled out any cut in its variable mortgage interest rates following the ECB rate cut.

Its executive chairman, David Hodgkinson, said its customers had already benefited as the bank had not increased rates when the ECB had raised them on two occasions this year.

Mr Noonan separated AIB from the other banks as they had not increased their rate hikes in line with previous ECB increases.

"So I suppose they had a reasonable case where they weren't passing on the reduction because they hadn't passed on two one quarter increases. The others are different," he said.

Irish Independent

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