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Dan White: Yes we bailed them out, yes they should be grateful, but no, banks will still screw you

Bank of Ireland's decision to increase the interest rates it charges customers for personal loans and overdrafts represents yet another hammer blow for hard-pressed borrowers. And Bank of Ireland isn't alone.

Its move came just one day after AIB revealed that it was "less inclined" to approve loans to borrowers who wanted to switch their mortgages from other financial institutions.

Figures published by the Irish Banking Federation last week showed that the number of new mortgages approved last year fell by almost 60pc to just 46,000.


Earlier this month, Halifax, which under its previous name of Bank of Scotland (Ireland), cracked the mortgage cartel in 1999, announced that it was closing its Irish retail banking network.

Just for good measure, mortgage bank Permanent TSB announced on February 1 that it was increasing its variable mortgage rate by 0.5pc. This was the second time in less than seven months that it had increased its mortgage interest rates.

With two days still left to go, it is safe to say that February 2010 has been a dreadful month for bank customers.

They are being clobbered by a combination of higher interest rates and reduced competition. Why is this happening?

Since the late 1980s, the advice to bank customers has been to shop around.

AIB and Bank of Ireland entered the home loan market, which had up to then been the virtually exclusive preserve of the building societies. This was followed by several overseas banks either entering the Irish market or beefing up their existing operations in this country.

The result was a long-overdue upsurge in competition in what had been up to then a cosy, cartelised market. Until the mid-1980s, so-called "mortgage famines" were a regular feature of the housing market.

With the building societies having the market to themselves, the demand for mortgages regularly exceeded supply. Anyone thinking of buying a house had to first deposit large sums of money with their building society in the hope that this would qualify them for a mortgage in a few years time.

When they did get their mortgage, homeowners found themselves paying some of the highest interest rates in Europe as the building societies milked their captive customers for all they were worth.

That all began to change in the late-1980s. Mortgages and other loans became more readily available as the banks entered the home loan market.

At the same time the arrival of the foreign banks, derided by Irish banks as "suitcase bankers", forced the local banks to slash their interest rates.

Now there are clear signs that process is going into reverse. Halifax has already fled the Irish market while both Ulster and NIB have unveiled massive loan losses and are pulling in their horns.

This is taking place at the same time as Irish Life & Permanent has effectively put its Permanent TSB subsidiary up for sale -- IL&P would almost certainly pay anyone prepared to take the Permo off its hands.


Which leaves just AIB and Bank of Ireland. After two decades of increased competition we have arrived at a back-to-the-future situation with the old duopoly rapidly re-establishing itself.

This is going to be very bad news for consumers. With banking competition rapidly dying and their balance sheets in tatters, the "big two" are rapidly moving to exploit their position to boost profit margins at our expense.

Not alone are they far less willing to lend us money, they will charge us much higher interest rates when they do.