‘No immediate plans’ to pass cut to variable rate customers

Since crash, Irish banks have stopped automatically passing on rate cuts to variable customers


The country’s main mortgage providers indicated today there were no immediate plans to pass on the latest European Central Bank (ECB) rate cut to variable rate customers.

The ECB cut its main lending rate to a new low of 0.25 per cent on Thursday in response to a slump in inflation which has sparked fears the continent’s fragile recovery may be stalling.

While tracker mortgage holders will automatically benefit from the cut, tens of thousands of variable rate customers remain in the dark as to whether their lenders will follow suit.

Since the financial crash, domestic banks have broken with the policy of automatically passing on ECB rate changes to variable rate mortgage holders.

Bank of Ireland, Allied Irish Bank, Permanent TSB, Ulster Bank and KBC Bank said either there had no immediate plans to lower variable rates or a decision on the matter had not yet been taken.

While there are no accurate figures on the number of variable rate mortgage holders in Ireland, analysts suggest they account for about 30 per cent of the market, which corresponds to about 207,000 mortgages.

AIB customers on tracker mortgages will benefit from the interest rate cut as the tracker mortgage product is linked to the ECB interest rate whereas all other mortgage products are not - they are decoupled from ECB interest rates,” an AIB spokeswoman said.

Tracker mortgages are completely separate to the variable products with different interest rates, she said.

Bank of Ireland said its tracker-related products moved automatically with ECB rate cuts and their customers would see a reduction in rates take effect from next Wednesday.

However, a spokeswoman said: “Variable rate products are not ECB tracked so do not move automatically - however, all rates remain under regular review.”

Ulster Bank and KBC bank both said there was currently no planned change to variable rates but that their products and services remained under “continual review”.

Permanent TSB indicated no decision had been made on whether to pass on the cut to variable rate customers but the issue remained under review.

It said tracker customers would see the ECB rate cut passed on in full within 30 days “in line with the terms and conditions of their mortgages”.

Recent Central Bank figures indicate variable rate mortgage holders account for about €48 billion of the outstanding €125 billion-strong Irish mortgage market.

A spokeswoman for the Irish Banking Federation welcomed the latest ECB cut, saying it would help ease borrowing conditions for customers.

On whether State-owned banks should be forced to pass on the cuts to its variable customers, she said:” Interest rates are a matter for individual institutions in a competitive environment - with due regard to the impact on the cost of funds, the interests of depositors as well as to their important role in supporting the wider economy.”