Charlie Weston: Banks are operating financial apartheid
IT will probably become known as financial apartheid, and you can bet your life it will become a big issue this year.
The decision of Permanent TSB to hike the interest rate it charges on its standard variable rate mortgages by 0.5pc, to be quickly followed by other lenders, will bring into sharp focus how lenders punish customer loyalty.
With standard variable rates heading upwards, in a move that will impact up to 350,000 people, many homeowners with these mortgages will be looking at locking into some of the historically-low fixed rates on offer.
Rates as low as 3.19pc fixed for three years are available out there, and even 4.5pc for 10 years.
Homeowners with standard variable rates are learning to their cost that their lender is free to move up these mortgages irrespective of what the European Central Bank (ECB) does on rates, so they want the security of fixed now that overall rates are so low.
But the catch is that you have to be a new customer of a bank or building society to benefit.
'Your Money' has been swamped by emails from homeowners who want to lock into a fixed-rate mortgage but have been told by their lenders that the best rates are only available to new customers.
Lenders who do this are operating a system of financial apartheid. It is most unfair that lenders are differentiating between new and existing customers. They are advertising competitive rates but these are not available to their current customers, in a development that punishes customer loyalty.
Permanent TSB is one of the worst culprits in this regard. It offers new customers a five-year fixed deal of 3.7pc, but existing customers will be hit with a 5.75pc interest rate.
The difference in monthly repayments amounts to almost €300 on a €250,000 mortgage over 30 years.
Bank of Ireland and KBC Homeloans are two other lenders operating this system of low fixed rates for new customers, but higher rates for existing customers. What is needed is some tough action by the regulator, for a change.
The Financial Regulator was able to act a few years ago when lenders were failing to pass on cuts in the ECB rates to those with standard variable rate mortgages -- it leaned on the lenders to pass on the cuts.
Of course, banks and building societies need to recoup losses and return to profitability. But they should not be doing this by exploiting existing customers.