Tuesday 23 January 2018

Mortgage holders hit again as rates top 6pc

Charlie Weston

Charlie Weston

PERMANENT TSB has increased its variable rates for the third time this year in a move that has seen some of its mortgage costs top 6pc for the first time in three years.

The move to impose a third hike will mean monthly costs have risen this year by almost €100 a month for every €100,000 borrowed.

AIB said yesterday it was leaving its variable rates unchanged despite announcing a rise in tracker rates and other lending costs.

Some of AIB's variable rates are now half of those of Permanent TSB, as AIB has not pushed up variable rates for almost a year.

Bank of Ireland said it was keeping its variable rates under review. It did not pass on April's European Central Bank (ECB) rise to mortgage holders on variables.

But Permanent TSB said it was passing on the ECB's rate rise announced at the start of this month, effective from August 22.

It also passed on the April ECB rise, and pushed up variable rates by 1pc in February even though eurozone rates had not moved at that time.

The three hikes this year will see the bank's standard variable rate jump to 5.69pc.

Its loan-to-value rates have also risen, with two of them more than 6pc.

A loan-to-value rate is one where you pay lower interest if you have a larger deposit when buying your home.

Brokers said the last time mortgage rates were this high was in 2008. Permanent TSB's variable rates have increased by 3pc since August 2009, adding €280 to the monthly repayments on every €100,000 borrowed.

A spokesman for the bank insisted that most of its residential borrowers were on good-value tracker mortgages.

Most of those who were on variable rates were older borrowers who had paid off most of their mortgages, he said.

Those taking out a mortgage for the first time, or topping up an existing mortgage, with Permanent TSB also face higher costs, with lending rates now between 5.10pc and 5.69pc.


Karl Deeter of Irish Mortgage Brokers said: "This will make it more difficult for those who can borrow to get access to funds. It raises questions about whether the money used to rescue the bank was worth it."

Permanent TSB has also passed on the latest ECB rate rise to its thousands of buy-to-let investors, at a time when it is putting them under pressure to come off interest-only deals.

There was some surprise that both AIB and Bank of Ireland again held off on passing on this month's eurozone rise to variable-rate customers.

Frank Conway, of personal finance website Moneycoach.ie, said he believed the two lenders were reacting to political pressure.

The Programme for Government calls on lenders to cut costs instead of hitting customers with more rises.

Irish Independent

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