Pressure on banks as lending tightens up

Irish mortgage lenders are set to again come under pressure from the Department of Finance over their standard variable rate (SVR) mortgage offerings, which remain substantially higher than EU averages.

Minister for Finance Michael Noonan is set to meet with all the banks prior to the October Budget. He will likely ask why there has been no significant movement on lowering SVR mortgages, despite a significantly lower cost of wholesale funding.

Mr Noonan is likely to summon bankers following his appearance at the banking inquiry on Thursday and the Fine Gael party think-in ahead of the new political term.

Four times the rate

In May, the chief executives of the State’s biggest financial institutions were called before the

Oireachtas

finance committee to justify charging 300,000 people with SVR mortgages four times what they were charging tracker mortgage holders.

The bankers defended variable rates which were, on average, just over 4 per cent compared with an average SVR across the euro zone of 2.47 per cent.

Meanwhile, it has emerged that Irish small- and medium-sized businesses are seeking bank credit at levels not seen since the height of the boom. But ongoing delays in decisions on loan applications are hampering business growth, it has been claimed.

The latest Bank Watch Survey from ISME also shows a sharp reduction in successful applications for credit.

Refused funding The survey shows that 45 per cent of companies that applied for funding in the past three months were refused

by their banks, an increase on the 33 per cent refusal rate seen in the previous quarter.

"After a slow but steady improvement in credit availability over the last two years, it is hoped that these results are just a blip and that the flow of funds into the SME sector will continue," said ISME chief executive Mark Fielding.

"It is difficult to discern a reason for this slowdown," he said, "as the Strategic Banking Corporation of Ireland [SBCI] has been active in the market since March and demand for bank credit is steady".

“However, the ISME help line has had numerous calls from SME owners enquiring about the SBCI funds, as it seems that the message has not permeated down through the two banks’ management and staff.