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Banks urged to cut lending rate

BANKS have been called on to cut the rates on variable mortgages after a sharp fall in the borrowing costs for banks. Lenders have repeatedly cited the high costs of funds as the reason variable rates are more than double tracker rates.

But the borrowing costs for Irish banks have fallen by about 1pc in the past six months. The interest rates on variable and loan-to-value mortgages are a multiple of those being paid by people with tracker mortgages.

The gap in repayments is now more than €400 a month between what a family is typically paying on a variable compared with someone on a tracker mortgage.

Chairman of the Consumers' Association Michael Kilcoyne called on the Department of Finance to force the domestic banks to cut their variable rates.

Some 300,000 homeowners are on variable rates, with 375,000 on tracker rates.

He said: "The Department of Finance should force the banks to pass on lower funding costs to consumers. The banks will still make the same profit margin and would lessen the pain for hard-pressed families."

And Michael Dowling (above), of the Independent Mortgage Advisers' Federation, said a cut in variable rates would help the 96,000 residential mortgage account holders who are three months or more in arrears.