McGrath accuses banks and government of abandoning variable rate customers

McGrath accuses banks and government of abandoning variable rate customers

Deputy Michael McGrath TD

The decision of AIB to hike up their variable mortgage interest rate by another 0.5% is further evidence that the banks and the government have completely abandoned variable rate customers, according to Fianna Fáil finance spokesperson Michael McGrath.

Speaking following the announcement yesterday, Deputy McGrath said: “AIB’s decision to add 0.5% to its variable mortgage rate on top of a recent 0.5% hike will bring many mortgage holders to the point of not being able to meet their monthly mortgage commitments. The move will also reduce the disposable income of 70,000 borrowers with negative consequences for consumer spending in the domestic economy.

“The news, coming on the back of the announcement by Bank of Ireland and ICS Building Society that their variable rate is to increase by 0.5%, is further evidence that the banks regard variable rate customers as an easy target to make up for losses incurred elsewhere. Far from passing on the last ECB rate reduction in July, the two pillar banks have now moved their variable rate in the opposite direction – increasing still further the gap between the rate paid by tracker customers and by variable rate customers.

“In my view, it is neither fair nor reasonable to continue to increase the differential between the tracker interest rate and the variable interest rate. The government indicated some time ago that tracker mortgages could be moved to IBRC as part of the overall restructuring of the Irish banking sector. Such a move would improve the overall funding position of the banks and could relieve some of the pressure from variable rate customers.

“Let’s take the example of two different mortgage customers with an outstanding mortgage of €200,000 and 20 years remaining in the mortgage. One customer is on a tracker rate of ECB + 1% (an interest rate of 1.75%) and the other is on a variable rate of 4%. The customer on the tracker rate pays €224 less per month than the variable rate customer, €2,685 less per year and €53,700 less over the lifetime of the mortgage. I would call on the Minister for Finance to state what the government’s strategy is for variable rate mortgage customers. Is the government willing to stand back and allow variable rate customers continue to be the fall guy for losses incurred elsewhere in the banks?

“In the Programme for Government, the coalition committed to forcing the banks to cut costs to forego a 25 basis point increase on their variable rate mortgage. We have not heard a word on this since Fine Gael and Labour came to office. Instead, the government has remained silent as the banks take the easy option of targeting variable rate customers again and again.”

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