PERMANENT TSB will increase mortgage interest rates on Monday for the second time in a year, in a move that is expected to be followed by rival Irish lenders.
The bank yesterday blamed the “challenging business environment” for its decision to add half a percentage point to its standard variable rate, a move that will affect 80,000 customers. The new standard variable rate will be 3.69 per cent, the highest offered by an Irish-owned institution.
For a typical mortgage of €250,000 over 30 years, the monthly increase would be roughly €70. The bank said its average mortgage affected was €62,500, with the average monthly repayment rising €15.
Chief executive David Guinane said the bank was “under pressure” because of the cost of raising money, both from retail deposit holders and in the markets. “To persist with uneconomic margins on this product at a time when the bank is losing money would be irresponsible and would result in larger problems down the line,” Mr Guinane said.
The move is likely to be followed to some extent by rival Irish-owned lenders, none of which raised rates when Permanent TSB did so in the summer.
“We don’t believe the pressures we’re under are unique,” said Mr Guinane yesterday, adding that it does not expect to increase rates further this year unless the European Central Bank does so.
The move came as the Central Bank said the economy was likely to return to growth in the second half of the year. In its latest quarterly bulletin, the bank said Ireland’s economic output would contract by 2 per cent over 2010 as a whole. But positive export-led growth is expected to return in the second-half of the year. However, net employment will not start to rise until 2011, the Central Bank has forecast.