Mortgage rate cuts 'on the way' for PTSB customers
Mortgage customers at Permanent TSB are in line for cuts after the bank became the latest lender to indicate it will charge less for home loans.
It comes as Ulster Bank reduced one of its key variable rates, and Bank of Ireland reversed mortgage rate increases it announced at the start of the year.
Permanent TSB CEO Jeremy Masding hinted strongly the bank will cut the interest on some variable rate mortgages.
He also admitted tracker customers could also see a cut as there is now a prospect the European Central Bank will drop its key refinancing rate to a minus figure.
The bank chief would not be drawn on the specifics of a variable rate cut, but said it could go ahead even if the ECB cuts its main refinancing rate below zero for the first time.
Permanent TSB has one of the highest variable rates at 4.16pc.
An ECB cut below zero, which is now seen as a realistic prospect, would be passed on to tracker customers, Mr Masding said.
The average tracker interest rate is 1.28pc at Permanent TSB and trackers make up the bulk of its lending.
A negative ECB refinancing rate would be an issue across the entire Irish banking system, not just for Permanent TSB, Mr Masding said.
Even though lower tracker rates would be a big financial hit for the bank, a tracker rate cut would not stop the bank cutting variable rates, he said.
Banks are currently making profits on trackers, but a negative ECB rate would squeeze bank profit margins.
"Of course it would impact the bank, but it is unlikely it would impact a decision I have already made [to cut rates]," he said.
"We keep the rates under constant review. This is not just a Permanent TSB issue, it is a European banking phenomenon."
The group reported profit before tax and exceptional items of €42m for the six months to June 30, a 42pc fall year-on-year.
Yesterday, European Central Bank president Mario Draghi signalled a rate cut.
He said the ECB expected its key interest rates to remain "at their present or lower levels" at least through the first half of 2020, suggesting a rate cut could be on the horizon.
The ECB retained its main refinance rate at 0pc. This is the rate that determines tracker mortgage rates.
Markets are now convinced there will be a cut in what the ECB charges banks for keeping their cash, with the so-called deposit rate expected to go from -0.4pc to -0.5pc in September.
Markets are now pricing in a high probability of a cut in the refinance rate, which would directly benefit all those on trackers.