BoI stands firm on variable rate mortgages - as profits soar 80pc
Bank of Ireland has made clear it will not be cutting rates on standard variable rate mortgages any time soon - even as the bank posted an 80pc increase in half-year profits.
The lender, which is 14pc state-owned, has one of the highest standard variable rates on the market and has steadfastly refused to cut them despite pressure from the government. Instead, the bank has focused on its fixed rate mortgage business.
Bank of Ireland yesterday said profits for the first six months of the year rose 80pc to €624m, but company chief executive Richie Boucher ruled out any significant interest rate cuts.
Irish mortgage rates are among the highest in Europe but Mr Boucher said the cost of borrowing for Irish banks was still very high.
"I would love to be able to borrow at the same rate as European banks. I would love to have the same past experience of other European banks. We don't," he said.
"With [our mortgage rates] as they are... we have to get 98.65pc of all our mortgage lending right. We have focused on the fixed-rate offering. It's a risk mitigation from our point of view. We look at our mortgage portfolio and the lesson of the past is that customer repayment capacity is impacted by income and absolute level of repayments, and taking out a fixed-rate mortgage mitigates the risk of repayments going up.
"We decided to put our capacity and capital behind fixed-rate mortgages. We think that is the sensible thing to do," he said.
Mr Boucher said the new Central Bank rules on mortgage lending had not had a huge effect on the bank so far this year.
The bank has sold 68 owner-occupier homes that it had repossessed so far this year. It has sold another 19 buy-to-lets.
Bank of Ireland's results came as a new report from the ratings agency Standard & Poors (S&P) warned that, while the Irish banking system was vastly improved since the crash, it still had issues around high levels of debt in the economy.The report is broadly positive but warns that "mortgage arrears are high".
"We view Ireland's economic risk as high. Businesses, households, and government finances were all hit hard by the fallout from the collapse in property collateral values and the severe difficulties in the banking system. We now see clearer evidence that Ireland is recovering from its deep contraction and that property prices are rising.
"That said, we believe that the Irish banking system continues to suffer as a result of past events," the report stated.
"The stock of non-performing assets is high, relative to other banking systems, and we expect the work-out of these assets to take a few more years," S&P added.