Wednesday 21 March 2018

Danske Bank is latest to hit homeowners with rate hike

Charlie Weston Personal Finance Editor

Danske Bank customers will be hit with a huge hike in mortgage rates from next month, adding €60 to monthly repayments on a €200,000 mortgage.

Over a year this will mean additional repayments of €720.

From July 8 the variable rate will rise by 0.65pc to 4.95pc – making it one of the highest variable rates in the market.

The latest hike comes a year and a half after the lender, which used to be called National Irish Bank, hiked its variable rate by almost 1pc.

And from next week, homeowners who have variable mortgages with AIB, EBS and Haven are to be hit with a rise of up to 0.4pc.

AIB made the announcement about the rise just a week before the ECB cut its main lending rate.

Danske Bank yesterday defended the move to raise its rates for existing and new customers, insisting it was the first rise since 2011.

It is ditching standard variable rates for new customers and moving to rates based on the size of deposits. Those with bigger deposits will get lower rates under the new loan-to-variable pricing structure.

The bank's tracker and fixed rates for existing customers will remain unchanged.

Danske and AIB/EBS have raised variable rates despite the ECB rate falling to a record 0.5pc, with the prospect of another cut in the next few months. Other lenders failed to pass on last month's ECB rate reduction to customers on variables.

Meanwhile, many people say they plan to buy a property in the next year. But despite this, separate figures show another fall in mortgage lending by banks.

A survey by property website among 1,500 people found that almost a third plan to buy a property in the next year.

And most people expect house prices to be the same in a year as they are now.

Just a fifth believe prices will rise, while similar numbers predict a fall in prices.

However, figures from the Central Bank show that there was a 2pc drop in lending for house purchases in April compared with last year. People with mortgages are paying them off faster than new homeloans are being issued, the data indicates.

So few new mortgages are being issued and so much existing mortgage debt is being paid off that the overall mortgage debt of households shrunk by €336m in April. Mortgage debt owed by households now totals €84bn.


Economist Alan McQuaid of Merrion Stockbrokers said the reluctance of banks to lend was holding back recovery.

"The lack of available credit will severely hamper the overall recovery prospects for the Irish economy as a whole, and keep the unemployment rate high," he said.

Banks insisted they were lending for residential property. Felix O'Regan of the Irish Banking Federation said: "Our position firmly remains that the underlying trend shows new mortgage lending has been increasing – albeit from a low basis as widely recognised."

Last year, some €2.6bn was advanced for mortgages, with experts predicting that this year lending could hit €4bn.

Irish Independent

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