Permanent TSB ups fixed mortgage rates again following ECB hikes

Permanent TSB said on Friday that it is increasing its fixed mortgage rates for new business by an average of 0.51 of a percentage point, bringing total increases by the bank for this type of product to close to 1 point since the European Central Bank (ECB) started to hike official rates in July.

The ECB has increased its main lending rate from zero to 2.5 per cent over the past six months.

PTSB customers who have received a fixed-rate offer letter from the bank since November 18th will have until mid-April to draw down their loan at that rate, the bank said.

“There are no changes for mortgage customers on existing fixed rates and there are no changes to variable rates for new or existing mortgage customers,” the bank said. “The rates applicable to tracker mortgage customers continue to reflect the current ECB rate, in line with the specific terms and conditions of the loans.”

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Irish banks have lagged behind European peers in passing on rising European rates to mortgage customers. Domestic banks here have tens of billions of euro of surplus deposits, and have benefited hugely from the ECB also moving since July from charging banks 0.5 per cent for excess deposits stored with it to paying them a rate of 2 per cent.

PTSB has a much smaller surplus deposit base than AIB and Bank of Ireland after it used much of its surplus cash to take over €5.2 billion of former Ulster Bank loans in late 2022 – with more loans to follow this year. Bank of America analysts estimate that PTSB’s customer deposits stood at €21.6 billion at the end of last year, almost €2.6 billion higher than the size of its loan book.

However, market observers say that PTSB is reluctant to cede mortgage market share to rival banks at a time of heightened loans switching activity in the market.

While the latest rates move, effective from Monday, equates to an average increase of 0.51 per cent on fixed rates, it ranges from 0.05 per cent to 0.8 per cent, depending on length of the fixed-rate term, amount being borrowed, and the size of loan relative to the value of the underlying property.

PTSB’s five-year fixed rate for a mortgage with a loan-to-value of 80 per cent to 90 per cent, for example, will be 3.95 per cent under the new pricing.

AIB has also hiked its fixed rates twice in recent months, amounting to a total increase of one percentage point. Bank of Ireland raised the cost of fixed-rate mortgage products for new customers by 0.25 of a percentage point in November. Irish nonbank lenders have moved more aggressively on rates, because they have been more affected by a spike in capital markets funding, where borrowing costs had jumped in the past 12 months.