PTSB will resist rate cut until it gets deal on trackers
LEADING lender Permanent TSB (PTSB) will only cut its heavily criticised variable rate if it is allowed to shift its loss-making tracker mortgages into a separate entity.
And this could take months to finalise -- this means around 80,000 homeowners will have to keep paying the highest mortgage rates in the market until the summer, it emerged last night. The Government came under intense pressure last night in the Dail to force the almost-nationalised PTSB to lower its rate.
But Junior Finance Minister Brian Hayes made no promises to take immediate action. He said it was a condition of the bailout deal that the banks must be run "on a commercial arms-length basis".
Permanent TSB charges 5.19pc on its variable rates to residential homeowners, compared with a rate of 3.04pc at fellow state-owned AIB.
Fianna Fail's Michael McGrath called in a private members' motion for the Government and the Central Bank to force a reduction in the PTSB's rate.
According to banking sources, PTSB is to resist all calls for a rate cut until a deal is done to put its loss-making residential and buy-to-let trackers and those of AIB into a special entity. But a deal would not mean that homeowners on tracker mortgages would have their terms and conditions affected.
Talks are continuing between the Department of Finance and the IMF/EU on extracting the trackers from the two banks.
Mr Hayes last night referred to forthcoming meeting in April with the troika during the Dail debate last night.
Some 65pc of the PTSB loan book is made up of trackers. These products are pegged to the ECB rate, making them the cheapest mortgages in the market.
If a deal is done to take an estimated €22bn worth of trackers out of PTSB they would be moved into what is known as an off-balance sheet vehicle, according to informed industry sources.
This is similar to the situation where Irish Nationwide's deposits were moved to PTSB, and Anglo Irish/Irish Bank Resolution Corporation.
The terms and conditions did not change. The products were just managed by a different institution.
It is understood that the troika has been concerned that the merging of AIB and EBS has sucked competition out of the banking market.