Noonan rejects call to intervene in interest rates hike

The Tánaiste and Minister for Finance have insisted that the move by AIB and the EBS to increase their standard variable mortgage interest rates is a commercial decision for the two institutions.

Michael Noonan told Labour backbencher Aodhán Ó Ríordáin "it would not be fair for 2.1 million taxpayers to subsidise 138,000 owner- occupier mortgages, especially when the vast majority of these mortgage holders can afford to pay their mortgages".

He said the “relationship framework” with the banks “provides that the State will not intervene in the day-to-day operations of the bank or its management decisions”.

The Government was acutely aware of the increasing financial stress some households faced but his role was to “ensure the bank is run on a commercial, cost-effective and independent basis to ensure the value of the bank as an asset to the State” as agreed with the troika.

The Dublin North-Central TD had highlighted the resentment of Irish society towards AIB into which the taxpayer had put €21 billion. But Mr Noonan told him it was unfair for 2.1 million taxpayers to have to subsidise the 138,000 others.

He added that to fund mortgages the bank had to borrow at wholesale rates which were higher than the ECB base rate and had to ensure the rate was sustainable, gave a return to the bank and ultimately the State as shareholder.

Earlier Eamon Gilmore told Fianna Fáil leader Micheál Martin, who had called in the Dáil for a reversal of the increase, that the Government had already intervened to address the mortgage arrears crisis.

Mr Gilmore said that since the introduction of the personal insolvency system some 8,000 mortgage arrears cases had been resolved through various settlements.

The announcement of the interest rate increase was bad news for mortgage holders, but “that is a commercial decision made by the two institutions”.

Mr Martin had described the increases as a “devastating blow” to many mortgage holders and the 0.4 per cent increase, a week before the expected decrease by the European Central Bank, would be about €800 for a mortgage of €300,000, which was “savage”.

'Bad news'
The Tánaiste said the average standard variable rate mortgage in AIB was €128,000, which would result in a €24 increase monthly. "It is bad news for the householders concerned but that does not amount to €800 a year." The average standard E

BS mortgage was €102,000, which would mean a monthly increase of €17.

“Again it is bad news for the householders concerned but it does not amount to €800 a year,” Mr Gilmore said.