The Government is believed to want some signal from the banks they will assist customers in availing of lower variable interest rates within six to eight weeks.
This might not involve the banks cutting their standard variable rates. Instead, the banks could take measures to inform variable rate customers lower interest charges apply to their fixed-rate products.
It is understood this was a message relayed to AIB, Ulster Bank and ACC when they met with Minister for Finance Michael Noonan yesterday.
Downward trajectory
AIB said afterwards mortgage rates were on a “downward trajectory”. The bank has implemented two cuts in the past six months.
Ulster Bank has just launched a campaign to remind its fixed-rate customers they can continue to benefit from these lower rates when their term expires and they don't have to switch to standard variable products. The Minister is believed to have reminded banks the State will take action if there is no move by them. This could involve a bank levy or legislation to give the Central Bank power to regulate rates.
One banker said the department was “reasonably forceful” in making this point yesterday.
Mr Noonan is meeting the leaders of Bank of Ireland and Permanent TSB tomorrow.
“The first three meetings have all been very positive,” said Mr Noonan’s spokesman.
This move on the banks follows pressure from backbench Fine Gael TDs to tackle the matter, seen as more sensitive politically than the arrears debacle.
“The hardening of Michael Noonan’s language follows a political decision to move in that direction,” said a political source.
AIB’s standard variable has been reduced to 3.9 per cent but the other players are charging more than 4 per cent while European Central Bank rates are almost zero. Lower fixed-term rates are offered by all the banks here.
Bank of Ireland
The Minister’s engagement with Bank of Ireland’s
Richie Boucher
is seen as the biggest challenge in getting lower rates. Permanent TSB, which has completed major fundraising on private markets, has also refused to cut its rates. Both institutions implemented rate cuts in January for new customers but not existing ones. The Government wants cuts for all.
Although observers believe eventual rate cuts of between 0.5 and 0.75 percentage points could be in play, there has been no public sign of change from Bank of Ireland or Permanent TSB. Uniform moves are unlikely, however, and reductions in the price of fixed-rate loans are emerging as an alternative.
