A FINE Gael election plan that would force banks to curb mortgage rate hikes threatened to backfire last night.
AIB, Bank of Ireland/ICS, EBS and Irish Nationwide are all expected to raise their variable mortgage rates to stem their massive losses. Permanent TSB and Ulster Bank have already announced increases this week.
Fine Gael finance spokesman Michael Noonan promised that state-supported banks which raised rates would be forced to reduce them again by 0.25pc within 100 days of the party getting into government.
But mortgage experts said the move would lead to banks hiking their variable rates sooner -- and by more.
It came as the relentless pressure on struggling mortgage holders moved centre stage in the election yesterday, with Ulster Bank now set to hike its variable rate by 0.5pc.
Permanent TSB confirmed the revelation reported in the Irish Independent that it was imposing a savage 1pc hike on its variable mortgages and axing fixed rates.
Frank Conway of Irish Mortgage Corporation said the banks would render Fine Gael's election pledge meaningless by increasing their variable rates in advance.
"This will force other lenders who haven't already moved to grab as much of an increase as they can -- and do it much quicker than they may have intended up to now," he said.
Mr Noonan said his party would force those banks receiving state support to tackle bank bonuses and high salaries so that they could reduce planned rate hikes for mortgage holders.
"We want them to cut their cost base to the level where they can reduce the level on the variable mortgage by 0.25pc. That'll cost a certain amount of money but there's a lot of fat in the banking system," he said.
Banks are in the process of hiking up their mortgage rates because their own cost of borrowing is constantly rising and they are also losing money on their tracker mortgages.
Mr Noonan also outlined plans to help up to 250,000 people trapped in negative equity, with further mortgage relief worth up to €166 a month.
But Fine Gael is still not saying how exactly its ¿120m election promise will be paid for, leading Fianna Fail leader Micheal Martin to warn about the danger of engaging in "election gimmickry or promises".
Pressure is growing on mortgage holders with the news that Ulster Bank will impose the 0.5pc rise in its variable rate from March 1, in a move that will add ¿27 to the monthly repayments for every ¿100,000 borrowed.
The British-owned bank became the second lender to hike its variable rate after Permanent TSB confirmed it was putting up its rate by a full 1pc.
The increase will affect mortgage repayments from March 7.
Permanent also confirmed it was suspending all fixed-rate options for customers who have variable rates. Those who already have a fixed rate will be unaffected.
It may reintroduce fixed rates, but they will be priced so high that mortgage holders will not opt for them.
The aggressive rate hike by Permanent was characterised as a "black Friday for mortgage holders" by the Professional Insurance Brokers Association.
Brokers said yesterday hundreds of angry Permanent TSB customers who had older mortgages were contacting them to see if they could switch to another lender.
Anyone who has paid off a large chunk of their mortgage may be able to switch their mortgage to KBC Bank or EBS, Frank Conway of Irish Mortgage Corporation said.
Analyst with Davy Stockbrokers Emer Lang calculated yesterday that Permanent TSB would generate ¿53m from the rate hike.
The unfolding mortgage crisis has become a key election issue, with Fine Gael promising to help the "negative equity generation" who bought at the height of the boom with additional tax relief.
As many as 250,000 mortgage holders qualified for the proposed debt relief, experts calculated.