PERMANENT TSB is to lower the interest rate charged on its Standard Variable Rate mortgages by 0.35 per cent.
The reduction is even greater than the quarter percentage point cut announced by the European Central Bank yesterday.
The bank said more than 80,000 of its customers will benefit as a result. Homeowners with SVR mortgages will now pay interest rates of 4.34 per cent (down from 4.69 per cent).
This will reduce repayments by €40 per month for a customer with a 25-year mortgage of €200,000.
The 0.35 per cent cut will also apply to customers with mortgages on investment properties and will come into effect on 30 July.
This is the second rate reduction by Permanent TSB in 10 weeks but the figure is still among the highest of Irish lenders. The new chief executive Jeremy Masding said today’s move reflects the bank’s objective to bring its variable mortgage rates closer into line with competitors.
However, Masding also highlighted the bank’s continuing high funding costs and its need to be economically viable. “In the case of mortgages, we can’t divorce our mortgage rates from the cost of our funds and that remains relatively expensive.” In this context, he also confirmed that the bank will reduce deposit rates in the coming days.
ECB rate cut
The ECB dropped its key interest rate to a eurozone-era low of 0.75 per cent yesterday. Although the move would have sparked the decision from PTSB today, other banks have not followed suit.
The Department of Finance has said it is up to the management team and Board of each bank to price its financial products.
Bank of Ireland said that the bank’s tracker mortgage customers will have their rates decreased by 0.25 per cent as per the terms and conditions of their contracts but otherwise “the bank will continue to keep other interest rates under ongoing review”. It also referred to the elevated cost of funding as highlighted in the Bank’s interim management statement published on 24 April: “The Group’s operating income and net interest margin continue to be adversely impacted by the cost of funding, the carry-over impact of intense deposit competition in the Irish market in the second half of 2011.”
Rates remain under review at EBS, while AIB says that its standard variable mortgage rate will remain unchanged.
Ulster Bank was the only other lender to drop its rates for SVR customers, who will now pay 4.5 per cent.