PERSONAL FINANCE:Your queries answered
Q
I have deposits with both Permanent TSB and Irish Nationwide. Both were below the €100,000 threshold for the Deposit Guarantee Scheme.
Now that Irish Nationwide deposits have been transferred to Permanent TSB, my total with them will be well in excess of €100,000. Do I now lose protection under the scheme for the balance over €100,000?
- Mr D.McA, Dublin
A
A number of people are worried about the recent transfer of deposits from Irish Nationwide Building Society to Permanent TSB and from Anglo Irish Bank to AIB as a result of the decision to run down both institutions. The first thing to note is that all deposits in these four institutions are covered under the Eligible Liabilities Guarantee – which effectively covers savings in banks operating under the scheme, regardless of amount.
The €100,000 limit relates to a separate guarantee – the Deposit Protection Scheme – which was in place before the bank crisis, although the thresholds were lower at that time.
Your savings with Permanent TSB now exceed this sum and the Department of Finance tells me only the first €100,000 will be covered by the DPS – if you have a joint account the totals are per account holder per institution.
If you want to rely solely on this underlying protection, you will need to reduce your sum on deposit with Permanent TSB back below €100,000. In the meantime, you will be covered anyway by the broader Eligible Liabilities Guarantee.
Worried about threat of interest rate rises
Q
Our mortgage is currently on a variable rate of 3.25 per cent but we are worried that interest rates will start to rise in the short term and put extra pressure on our mortgage repayments. We'd like to move to a fixed rate but are not sure as to the term to go for (1,2,3,4 or 5 years). Can you advise?
- Mr RO’M, e-mail
A
You are right to be concerned. While it had appeared unlikely that we would see a rise in interest rates much before the end of the year, the European Central Bank (ECB) has now signalled that it could increase rates as early as next month. Senior ECB figures are on record suggesting there could now be three such rises in 2011, which could add an extra three-quarters of a percentage point on your interest rate by year end.
This will affect everyone on tracker mortgages. Most people on standard variable rates who have already seen significant increases as banks increase their margins, will also be impacted.
The problem for you is that many of the lenders are not even offering fixed rate mortgages at the moment, apparently because the rates they would have to pay for this money in the markets would force them to offer it at untenably high rates to consumers.
In addition, most available fixed rates will by now have priced in the latest ECB news.
If you can find a reasonable fixed rate, it might make sense to consider it for the next two or three years while we work through the cycle. I’m sceptical that you will find one that makes sense and certainly would be wary of locking in for too long,
A better answer may be to shop around for a better variable rate. However, the variable rate you quote looks very competitive to me.
This column is a reader service and is not intended to replace professional advice. No personal correspondence will be entered into.
Please send your queries to Dominic Coyle, QA,
The Irish Times,
24-28 Tara Street, Dublin 2. E-mail: dcoyle@ irishtimes.com
Irish Nationwide and Permanent TSB savings
