BAILED-OUT bank AIB is forcing a second mortgage hike in just three months on hard-pressed homeowners.
The decision to increase interest rates for 70,000 customers was today described as “madness”.
Families with a €200,000 mortgage now face having to cough up €1,440 extra a year.
The bank will raise its standard variable mortgage rate from 3.5pc to 4pc in November. This is despite a similar 0.5pc increase in September.
“This decision represents nothing short of financial |madness,” Frank Conway, of the Irish Financial Review, told the Herald.
“More and more families are already under severe financial pressure with many households left with less than €100 per month once essential bills are paid,” he added.
“AIB’s decision even goes against the rate making decisions of the ECB. The move defies common sense.”
Senator Darragh O'Brien said banks are living in “cloud cuckoo land” if they believe the increase will help ease the drastic mortgage situation.
“People are incredibly worried. How they are going to pay their mortgage now?”
The Fianna Fail senator and spokesman on finance pointed out that over one in five mortgages are already in arrears.
“How is this going to help the mortgage crisis?” he said.
AIB defended its decision and said it still has one of the lowest rates, as the average across the market is 4.4pc.
Chief executive David Duffy said the bank was “acutely aware of the financial impact” it would have.
“But this decision is essential in order to return AIB to a sustainable operating model and is part of a transformation of the bank's operating base,” he added. “AIB does not have an option of continuing to provide mortgages on a loss-making basis at pricing materially below our market competitors, as is currently the case. To do so would only see further erosion of the capital provided to the bank by the State.”
Bank of Ireland will increase its variable rate by 0.5pc next month. The rise affects all |customers with Bank of Ireland and ICS who have variable rate mortgages.
Bloxham stockbroker Alan McQuaid said the increases will do little to alleviate Ireland’s economic problems.
“I think it will be 2014 before we see any sort of positive returns,” he said.