Bank raises interest rates across the board
BANK OF Ireland has announced a range of interest rate increases which will see many of its mortgage and credit card customers, as well as those with overdraft facilities, paying up to half a per cent more for their loans.
The increases will add close to €100 to the monthly payments of someone with a €300,000 mortgage.
While the increases were well flagged by the bank’s chief executive Richie Boucher earlier this week, they came in for severe criticism from the Irish Brokers Association, which said they were completely out of step with the volatile economic situation across the euro zone.
Speaking after the publication of an interim statement on the banks results for the first half of this year, on Wednesday, Mr Boucher said the bank had tried to absorb two recent interest rate increases by the European Central Bank but said it could not avoid increasing borrowing costs to cover the high cost of deposits.
However, the chief executive of the brokers’ association, Ciaran Phelan, said the bank’s actions “fly in the face of the stance that the ECB took last week when they signalled that there will be no rate increases for the rest of the year”.
Mr Phelan claimed the increases will make mortgage repayments “absolutely unaffordable and may result in further numbers of homeowners falling into default”.
Bank of Ireland said it would increase the interest rate on standard variable rate (SVR) mortgages by 0.5 per cent while the purchase interest rate on personal credit cards will also go up by the same amount.
The interest rates on personal variable rate loans will climb by 0.25 per cent.
Changes to interest rates applied to personal and business overdrafts, personal current accounts and business loans will also come into effect from the end of this month, the bank said.
For every €100,000 owed, a 0.5 per cent increase adds €31 to monthly repayments so on a €300,000 mortgage, the increase will mean an additional €93 a month or €1,116 annually.
In a statement the bank said it had been “a difficult decision” and pointed out that it had been more than 12 months since it last increased variable rates “and we have delayed passing on both the April and July ECB rate increases up to this point.
“However, the price at which we provide lending facilities must reflect the cost of funding those facilities and we have no option other than to increase our rates to reflect the two ECB rate increases.
“The spread of the sovereign financial crisis to other EU countries has a silver lining for many hard-pressed Irish mortgage holders who are finding it increasingly difficult to meet their monthly mortgage payments,” Mr Phelan said. “With this degree of euro wide economic uncertainty, the threat of further rate increases this year has been lifted.”
Those Bank of Ireland mortgage holders who breathed a sigh of relief last week will no doubt be shook by the bank’s announcement yesterday, he said.