BANK OF IRELAND is to increase its variable mortgage interest rates by 0.5 per cent next month.
The bank has begun writing to customers who will be affected by the move, saying the increase will come into effect from October 24. The increase will affect holders of variable mortgage interest rates with Bank of Ireland and its subsidiary ICS Building Society.
The 0.5 per cent increase means a borrower with €250,000 left to repay on a 25-year mortgage will face a €56.50 increase in their monthly repayment.
The move, which had not been explicitly announced by the bank, comes two months after the bank announces a pre-tax loss of €1.25 billion for the first half of the year, including writing off €310 million of mortgage debts.
Announcing those results in August, bank chief executive Richie Boucher said the amount the bank was setting aside for impaired loans was dependant on the performance of its Irish mortgage book.
The increase also comes after the bank did not pass on a recent reduction in the ECB’s key interest rate to variable rate mortgage holders.
Tracker mortgage holders automatically inherit reductions to the ECB rate, but Bank of Ireland did not reduce its variable rate when the ECB cut its rates by 0.25 per cent in July.
The increase has been criticised by opposition political parties, with Fianna Fáil finance spokesman Michael McGrath saying the increase was “a serious blow to thousands of customers already struggling to meet their mortgage repayments”.
“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,” McGrath said, calling for progress on recent proposals that tracker mortgages could be transferred to IBRC in order to help other banks return to profitability.
“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?,” he asked.
His Sinn Féin counterpart Peadar Toibín said mortgage holders were already struggling “because politicians, banks and property speculators sold this state down the river and left ordinary people to pick up the tab”.
“When the banks were in crisis, this Government and Fianna Fáil found the €64 billion needed to bail them out,” Toibín charged, calling for a direct government intervention on the matter.
“When citizens are in crisis, the Government holds up its hands and says it can do nothing,” he said.
The Central Bank has previously compiled a report in which it opted against seeking the statutory power to force banks to change their interest rates.