Sunday 21 January 2018

BoI joins rivals by hiking the cost of borrowing

Charlie Weston and Joe Brennan

THE Bank of Ireland (BoI) is to raise its mortgage rates next week in a move that will hit thousands of homeowners, the Irish Independent has learned.

The bank, which has about 20pc of the mortgage market, is set to follow the lead of Permanent TSB and AIB by hiking rates for customers with standard variable-rate mortgages.

It is also understood that the BoI, which needs an additional €2.66bn in capital after selling commercial loans to the National Asset Management Agency (NAMA), will push up its fixed rates.

Rates are set to rise by 0.5pc, a move that will cost a homeowner with a €250,000 mortgage an extra €65 a month.

This is set to be swiftly followed by EBS raising its mortgage rates for existing standard variable rate borrowers.

After the move by AIB on Monday to increase its standard variable and fixed rates by up to 0.5pc, the BoI has emerged as the best value provider of standard variable and five-year fixed rates.

However, BoI chief executive Richie Boucher admitted yesterday that its mortgage rates would have to rise but did not specify when this would happen.

Speaking after the bank reported an underlying pre-tax loss of €2.9bn for the nine months to the end of December, Mr Boucher said some of the bank's lending products were unprofitable and interest rates for these would have to be addressed "in the near term".

The bank has 19pc of the residential mortgage market, according to analysts at the London offices of Societe Generale.

Mr Boucher said that the bank has been restructuring about 700 mortgages a month in Ireland over the past six to nine months. It has 199,000 mortgages in this country.

And 43,000 of its mortgages are in negative equity, the bank admitted.

It currently has the best value standard variable rate at 2.3pc for those who are borrowing less than half the value of their home. For those borrowing between 50pc and 80pc of the value of the property the rate is 2.4pc, according to Dublin-based Michael Dowling Mortgages.

On Monday, AIB increased all of its fixed, standard variable and loan-to-value mortgage rates. And the Irish Independent revealed the AIB plans two more rate rises to take fixed and standard rates up by 1.5pc overall this year.

Yesterday, mortgage brokers warned those who do not have the protection of being on a tracker or a fixed rate have days to lock into a good value, fixed rate, as all lenders are set to move on rates in the coming weeks.

Some 300,000 homeowners have standard variable rate mortgages. Those coming to the end of fixed-rate deals will also be hit by rising mortgage costs.


If all lenders follow the lead of AIB and push up their rates by 1.5pc over the year, then a family with a €250,000 mortgage would see their monthly repayments rise by €200 a month, according to director of the Irish Mortgage Corporation Frank Conway.

Mr Conway said anyone who could get a fixed rate of 4pc or less should take it as lenders will hike rates well ahead of any move upwards by the European Central Bank.

The revelations that AIB was preparing to hit its existing mortgage holders with a series of rises meant the new benchmark had moved to 4pc.

"If you have a limited capacity to absorb rate rises then you should fix. If you are afraid your payments will go up by €200 or €300 a month then move now," Mr Conway said.

He recommended consumers opt for three- or five-year rates.

Meanwhile, the Central Bank said that lending for home mortgages fell by €156m in February.

Irish Independent

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