Bank's rate rise 'hammers those teetering on edge'
A BANK attempted to calm customer anger yesterday after it confirmed it is to hike interest rates for 80,000 mortgage holders by 0.5pc.
Amid fears other banks are about to follow suit, Permanent TSB defended its decision to slap the huge increase on almost half of its customers.
PTSB claimed the rate for standard variable rate customers would add an average of just €15 to monthly bills, based on a €62,500 mortgage.
But financial experts rubbished the statement and said few customers had such a small mortgage with most having bought expensive property in the last five or six years.
The PTSB hike -- its second in a year and effective from this Monday -- will, in reality, mean at least an extra €65 a month for those who have a €250,000 mortgage with the bank.
And if a customer has a mortgage of up to €400,000, they can expect an increased payment of €106 a month.
The move, first revealed by the Irish Independent, provoked fury, with some financial experts saying the rate hike meant people were being pushed to the brink by PTSB.
The confirmed hike came as Fine Gael's finance spokesman Richard Bruton accused Irish banks of "turning the screw" on customers by not lending money.
Debt advice service, Free Legal Advice Centres (FLAC), predicted the rate hike would be followed by other banks and could affect 350,000 people.
"PTSB says it will cost some people €15 a month but that will only apply to people who bought homes more than 10 years ago. This will hammer those already teetering on the edge," said Noleen Blackwell of FLAC.
PTSB yesterday claimed that it had suffered an operating loss of at least €132m in the six months to June 2009 and was being forced to take steps to address its situation.
It is also expected to axe 120 staff on top of the closure of 11 of its 103 branches. Employee numbers have already tumbled by 500.
"A key challenge continues to be the high cost of funds required to finance the bank's mortgage loan book," PTSB said. "While the bank sources funds from a variety of sources, the overall cost of funds continues to be substantially higher than the official ECB interest rate.
"Clearly its not sustainable for the bank to be paying more for the raw material [money] than it can charge for the finished product [mortgage].''
The bank is increasing its interest rate on its standard variable mortgage [SVR] by 0.5pc. The new SVR rate will be 3.69pc.
PTSB chief executive David Guinane said: "We will work closely and sympathetically with any customer who has financial difficulties but we must also face up to our own financial challenges.
"To persist with uneconomic margins on this product at a time when the bank is losing money would be irresponsible and would result in larger problems down the line."