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Updated 18.19
HOMEOWNERS STUCK ON high variable mortgage rates shouldn’t expect much relief from two of the country’s biggest lenders.
Both Ulster Bank and Bank of Ireland bosses were today hauled before an Oireachtas Finance Committee to explain the premium charged on mortgages in Ireland compared to elsewhere in the eurozone.
And they weren’t giving away much despite political pressure to hand over some of their new-found profits to borrowers.
When Bank of Ireland chief executive Richie Boucher was asked if there was any plan for his bank to cut standard variable rates this year, he replied: “We look at our rates on an ongoing basis, I can’t make a commitment today.”
He said the bank would look at its cost of borrowing and the “competitive environment” before making any decisions.
Its cost of funds currently stands at just over 1%, compared to a standard variable interest rate of 4.5%.
Earlier, Ulster Bank chief executive Jim Brown said the bank had no intention of cutting standard variable rates despite charging a premium on loans in the Republic compared to the UK and Northern Ireland.
He said the bank’s variable rate simply reflected the price of lending in the market.
“We do not believe that our standard variable rate is overpriced,” he said.
The cost of providing mortgage finance in Ireland is substantially higher than in other jurisdictions.”
‘A slight misnomer’
However that claim appeared at odds with comments from Boucher, who said it was “a slight misnomer” that its Irish rates were significantly higher than those in the UK. He added there was little difference in costs between the two jurisdictions.
The big difference between our Irish business and our UK business in the mortgages is the historic loss experience,” he said.
All the major banks have been accused of being unwilling to pass on savings from record-low borrowing costs to existing customers because they needed to prop up their books, which were weighed down with loss-making tracker mortgages and accounts in arrears.
About 60% of the accounts on Ulster Bank’s mortgage book are on tracker rates, which follow the ECB’s official figure – currently at record lows – plus a small margin. For the Bank of Ireland, the share was around 56%.
But Brown said he was yet to come under any pressure from Finance Minister Michael Noonan to cut interest rates.
On Monday Noonan said he was calling in the six major lenders to ask them to cut mortgage rates as prices in Ireland moved further out of step with cheap lending across the eurozone.
‘No specific debate’
Brown said the bank had lost over €2 billion on its Irish mortgage book in last five years and unless the underlying costs involved in giving out loans came down it wouldn’t be able to cut its standard variable rates.
When asked if that meant it had no intention to make cuts, Brown replied: “That’s correct”. He added that he would be telling Noonan as much at any meetings, but there had been “no specific debate on mortgages” so far.
Last week AIB’s departing chief executive David Duffy said his bank would make interest rate cuts “in the next month or two” if favourable market trends continued.
Boucher, who earlier today was handed “The Bloody Keys” to Brian O’Donnell’s Gorse Hill mansion at the Bank of Ireland’s AGM, seemed fairly unimpressed with the move.
I can’t really comment on the strategies of someone that owes the taxpayer €21 billion,” he said.
First published 4.52pm
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