Bank of Ireland and PTSB hold off on higher rates as ECB hikes again

Bank of Ireland and Permanent TSB, alone among continuing Irish mortgage lenders not to have hiked non-tracker rates since the European Central Bank started increasing borrowing costs in July, signalled they are continuing to hold fire for the time being, even as the Frankfurt-based institution hiked rates again on Thursday.

Bank of Ireland, currently led by interim chief executive Gavin Kelly, said that, aside from the automatic increase on ECB-tracker mortgage rates, “no decision has been made in relation to other products”.

“The bank continues to keep all rates under ongoing review, and will clearly communicate any future rate change decisions at the appropriate time,” it said.

[ ECB heaps further pain on mortgage-holders ]

Permanent TSB (PTSB) is also keeping its rates under review, a spokeswoman for the bank said. “The bank is committed to offering rates that are competitive and will continue to keep its fixed and variable mortgage rates under review as market conditions evolve,” she said.

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The ECB governing council’s decision on Thursday to increase its main rates by 0.75 of a percentage point means that its main lending rate has moved from zero to 2 per cent since late July, as central banks globally race to tackle soaring inflation.

Two weeks ago, AIB became the first bank to increase mortgage pricing since the ECB started in July to raise rates for the first time in a decade. The country’s largest mortgage lender raised the cost of new fixed-rate mortgages by 0.5 of a point across its AIB, EBS and Haven brands.

Market observers say it is only a matter of time before Bank of Ireland and PTSB move.

[ Explainer: What will the ECB rate hike mean for your mortgage? ]

“Unfortunately, it looks like mortgage holders should brace themselves for another likely increase before the year is out, and certainly more again in the new year, with analysts suggesting that we are currently heading towards a base ECB interest rate of 3 per cent — from the pre-summer rate of zero,” said Trevor Grant, chairman of the Association of Irish Mortgage Advisors.

“We have reached a point now whereby all mortgage holders need to review their options — even the 200,000-plus mortgage holders who are on a tracker rate.”

Ulster Bank, which has stopped new lending after deciding last year to quit the Irish market, is holding off on increasing its standard variable rates on loans that are bound for Permanent TSB. KBC Bank Ireland, which is also in wind-down mode and has agreed to sell its performing loans to Bank of Ireland, said that it keeps its rates “under review, as per normal business practice”.

[ Analysis: ECB more hawkish as inflation outlook deteriorates ]

The three nonbank mortgage lenders in the market, ICS Mortgages, Finance Ireland and Avant Money, have each raised rates on certain products in recent months. ICS has also temporarily tightened up its lending criteria, while Finance Ireland said on Wednesday that it has suspended offering fixed-rate mortgages of 10 years or longer amid volatility in debt markets. Representatives for all each of the three declined to comment on Thursday on their mortgage pricing plans.

Unlike the ECB’s September announcement, no policymaker openly opposed the 75 basis-point hike, suggesting there is now real concern that the historic surge in inflation is becoming more entrenched in the economy.

The increase comes as homeowners in the State are already under financial strain from surging energy costs and rising prices generally. Headline inflation in the Irish economy is currently running at 8.2 per cent.

“Inflation remains far too high and will stay above the target for an extended period,” the ECB said in a statement. “The governing council took today’s decision, and expects to raise interest rates further, to ensure the timely return of inflation to its 2 per cent medium-term inflation target.”

Markets are already pricing in another 0.5 percentage point rise in December and a further one in the new year, bringing the ECB’s main lending rate to 3 per cent.