BANK OF Ireland has become the latest mortgage lender to increase its interest rates, with the bank claiming its current rates were “unsustainable”. The bank blamed the move, which affects more than 44,000 homeowners, on the rising cost of wholesale funding to the bank.
The bank’s director of consumer lending, Brendan Nevin, said it had “no choice but to make this move to ensure we remain open for business”. As a result, some 30,000 owner-occupiers who are repaying their mortgages on its standard variable rate will see their rate increase almost half a percentage point to 3.49 per cent from next Tuesday.
Yesterday’s move by Bank of Ireland follows similar rate hikes by Permanent TSB and the EBS last month. All three lenders have now increased their interest rates twice so far this year. Mr Nevin said this would be the last interest rate increase by Bank of Ireland in 2010, barring any moves in the European Central Bank (ECB) key lending rate.
As well as the 0.49 per cent increase in the bank’s standard variable rate, some 14,200 owner-occupiers who repay their loans on the bank’s range of variable rates will see their rates increase by a quarter of a percentage point to 3-3.35 per cent, while new fixed rate contracts will be 0.25 per cent higher than before.
Customers on Bank of Ireland’s buy-to-let mortgages will see rate increases from 0.15 to 0.45 per cent.
Labour Party housing spokesman Ciarán Lynch said the rate increase was “completely unjustifiable” and would “fill many mortgage holders with trepidation”.
The ECB key lending rate remains at a historic low of 1 per cent. The ECB’s governing council is expected to leave this rate flat for the 15th consecutive month when it meets tomorrow. However, the price paid by Irish banks for the wholesale funding they need to finance their mortgage operation remains elevated.
Meanwhile, private equity firm JC Flowers has emerged as a serious contender in its bid for EBS Building Society. JC Flowers, which is one of four bidders for EBS, confirmed yesterday it was to take a 49 per cent stake in one of Britain’s oldest building societies, Kent Reliance.
A senior JC Flowers executive said the company was interested in financial services investments in Ireland, amid reports that the company retained JPMorgan Chase as part of its bid for the building society.
EBS needs €785 million to meet the core equity ratio of 7 per cent set by the Financial Regulator. The Government has signalled that it is keen for the 75-year-old institution to secure private investment. The State has already injected €350 million into EBS and has pledged to fund the building society’s shortfall if private investment is not forthcoming.