BANK OF IRELAND has played down a newspaper report that it may be forced to increase its standard variable mortgage interest rates when new legislation on personal debt takes effect.
The Irish Independent this morning reported that the effects of new personal insolvency legislation, which will allow some struggling mortgage holders to free themselves from debt, could see lenders raise rates to insulate themselves from losses.
The report quoted Bank of Ireland group chief executive Richie Boucher as saying the bank ‘priced for risk’ – and suggested that the added risk being taken on by banks, who could see their mortgages effectively written off if the borrower falls into difficulty, would mean higher interest.
A spokeswoman for the bank this afternoon insisted, however, that Boucher’s comments were “in the context of a much wider conservation” about the new legislation, and that no consideration was being given to the matter.
“Mr Boucher made very general comments about pricing for risk, across the group,” the spokeswoman said.
The government’s proposed legislation, approved by the cabinet last month, will see a person enter into a ‘Personal Insolvency Arrangement’, with their debts taken over by a trustee as long as two-thirds of their debtors agree to it.
Those provisions mean, however, that struggling mortgage holders would still be reliant on banks to sign off on their PIA before they could free themselves from debt.
Among the other matters proposed by the Bill are amendments to Ireland’s bankruptcy laws – reducing the automatic discharge period from 12 years to 3.
Read: Government’s new debt regime may allow mortgage debt to be written off >
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