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Why isn't Noonan insisting that banks stop fleecing customers?

Time was when mortgage interest rates moved in lock-step with official ECB interest rates. That was then and this is now.

Despite official ECB rates having fallen to an all-time low of just 0.15pc, both AIB and Bank of Ireland are now charging their variable rate mortgage borrowers 4.5pc.

That's an absolutely massive 4.35pc interest margin.

The banks' excuse used to be that, as concerns about their solvency mounted in 2008 and 2009, they were forced to pay other banks and depositors much higher interest rates in order to attract funds.

At the same time, with over half of their mortgage lending tied up in trackers, where the interest rate paid by the borrower is capped at a fixed margin over official ECB rates, the Irish banks were forced to charge their variable rate customers higher rates in order to recoup their losses on trackers.

Not anymore.

As confidence in the Irish economy has returned, the banks have been able to slash the interest rates which they pay to their depositors with the latest figures indicating that the average interest rate has now fallen to just 0.65pc.

At those kind of average interest rates the banks are even making money on their tracker mortgages once again.

So have the banks passed on the benefit of these lower deposit interest rates to their borrowers? Have they what?

While the banks have slashed deposit interest rates, loan rates have remained at their elevated, post-crisis levels.

This has allowed the banks to rake in huge profits at their customers expense with AIB recording pre-tax profits of €437m and Bank of Ireland €399m during the first half of the year.

By not passing on lower interest rates to variable rate mortgage borrowers, the banks are trousering in the region of €1bn a year between them.

But don't we own the banks? Doesn't the State have a shareholding of over 99pc in both AIB and PTSB and a 14pc stake in Bank of Ireland?


Why isn't Michael Noonan stamping his feet and insisting that the banks stop gouging their borrowers? Why indeed.

Even odder is the fact that the extraordinarily high margins now being earned by the Irish banks on their performing loans hasn't attracted overseas banks into the Irish market. This has allowed the Irish banks to ruthlessly exploit the disappearance of competition in the Irish banking market.

So are there any signs of hope for hard-pressed variable rate mortgage borrowers? Unfortunately, not yet.

At the moment both the Irish banks and the Government are almost exclusively focused on ensuring that the domestic lenders pass the ECB bank stress tests, the results of which are due to be released in October.

Nothing or nobody will be allowed to get in the way of the goal of all the Irish banks receiving at least a pass mark from the ECB.

Overseas lenders tempted to enter the Irish market will also be inclined to hold off just in case the stress tests unearth some previously unsuspected nasties at the Irish banks.

That's the bad news. The good news is that a clean bill of health for the Irish banks in the stress tests could well remove the reservations that many overseas banks still harbour about entering the Irish banking market.

If, and it's still an awfully big if, this proves to be the case then we could see foreign banks coming back into the Irish market next year and variable mortgage rates starting to fall.

But not until next year, at the earliest.