Irish banks hold fire on non-tracker mortgage rates after ECB hike

Bank of Ireland said it will cease charging negative rates on deposits in excess of €1 million as ECB moves its deposit rate from minus 0.5% to zero

Permanent TSB chief executive Eamonn Crowley has said the bank will keep its rates under review, although it has no plans to pass on the ECB rate rise. Photograph: Fennell Photography 2022

The main Irish banks are holding off, for now, on increasing variable or new fixed mortgage rates, following the European Central Banks’s (ECB) decision on Thursday to hike official borrowing costs for the first time in more than a decade.

However, the rates on some €25 billon of tracker loans in the State, which are contractually linked to the ECB’s main lending rate that has risen to 0.5 per cent from zero, will automatically increase in the coming weeks. This will affect about 300,000 borrowers.

Bank of Ireland said none of its lending products, outside of tracker loans, are affected by the ECB move to increase its main lending rate as the Central Bank seeks to fight soaring inflation across the euro zone, running at 8.6 per cent last month. The ECB’s target is for 2 per cent inflation over the medium term.

Bank of Ireland said the ECB’s decision to also ditch its 0.5 per cent charge on deposits that banks store with the Frankfurt-based institution will see the Irish lender cease to apply negative rates on €15 billion of its deposits. Bank of Ireland had been progressively widening the net of customers affected by negative rates in recent years and, as of the end of 2021, had applied negative rates on accounts holding at least €1 million.


AIB, which had €14 billion of deposits on negative rates as of May, has left its annual charge of 0.75 per cent on accounts of at least €1 million unchanged. While the bank’s tracker rates will now move higher, a spokesman said that it will continue to keep all other rates “under review”.

Permanent TSB (PTSB) said it has no plans to increase its variable or fixed mortgage rates for owner-occupiers on foot of the ECB decision. A spokeswoman said this also applied to buy-to-let borrowers. However, its chief executive, Eamonn Crowley, said: “We will keep our position under review in light of any further market developments.”

The three non-bank mortgage lenders operating in the State, who are focused on fixed-rate loans and mainly source funding on bond markets, have each hiked near- to medium-term rates in recent months as market borrowing costs rose in advance of the ECB move.

A spokeswoman for Avant Money, which is owned by Spanish group Bankinter, said the lender, which entered Irish mortgages two years ago with market-leading rates starting at 1.95 per cent, keeps rates under review.

A spokesman for Finance Ireland also said that it keeps its rates “under constant review”. ICS Mortgages, owned by Dublin-based Dilosk, did not respond to a request for comment.

Ulster Bank, which is exiting the market and planning to sell off most of its loans to PTSB and AIB, is said to have no plans to raise non-tracker rates.

A spokeswoman for KBC Bank Ireland, which is selling its €9 billion performing loans portfolio to Bank of Ireland as it also quits the Irish market, said it “regularly reviews rates as part of normal business activities”. The ECB hike will automatically apply to its €1.7 billion of tracker loans.

Brendan Burgess, a consumer advocate and founder of, said Irish lenders, who, on average, were charging a rate of 2.73 per cent for new mortgages as of May, compared to 1.76 per cent across the euro zone, should be reducing home loan costs even as the ECB is raising rates.

“Irish families are already paying 1 per cent more for new mortgages than the average rate in the euro zone. One per cent doesn’t sound like a lot but on a mortgage of €300,000 it is €250 more interest per month,” he said.

Bankers and analysts say the elevated Irish rates are mainly because the State’s banks must hold much higher levels of expensive regulatory capital in reserve against their home loans as a legacy of the 2008 domestic property crash and subsequent arrears crisis.

Joe Brennan

Joe Brennan

Joe Brennan is Markets Correspondent of The Irish Times