Noonan leans on banks over loans ahead of Budget
PUNITIVE action in the Budget is hanging over the banks as the Government demands to know why they are continuing to gouge holders of standard variable rate mortgage holders. Michael Noonan, who expressed reservations about a levy on the banks when the possibility was aired by the Tánaiste, had opening talks with the banks yesterday, with aides talking of a clear context to the discussions.
While a levy may not be used against them, the banks are aware that Mr Noonan has a number of other budgetary weapons at his disposal.
Mr Noonan met executives from AIB and ACC for 40 minutes at his department yesterday, with other players due to be carpeted today and next week.
The banks were asked to outline the various options they have provided for homeowners on variable rates to reduce their monthly repayments, including new fixed rates that are lower than current variable rates.
The banks were also asked to provide figures on those customers who are switching to these new options. Revised targets for lending to small and medium enterprises and farmers were also discussed, a source said.
The minister will meet representatives from Bank of Ireland, KBC and Permanent TSB today and will sit down with Ulster Bank next week. But Fianna Fáil accused Mr Noonan of colluding in a PR campaign by the banks, with the talks taking place on the same day as the main Opposition party’s pre-Dáil think-in.
Michael McGrath, the party’s finance spokesman, accused the banks of engaging in a concerted campaign to maintain high mortgage rates in the face of ‘overwhelming evidence’ that they were out of line with rates in the rest of Europe.
‘Today’s meeting between the banks and the minister is likely to provide j ust another PR opportunity for the banks to claim that they have been responding to widespread anger among the public on this issue,’ Mr McGrath said.
‘The reality is that the banks have adopted every stalling tactic possible. The minister has been given the run around for the last six months since the issue was put on the Dáil agenda by a Fianna Fáil motion.’
Despite the fact that variable rates in Ireland are more than 2 per cent higher than the euro area average, the only bank to offer a straight cut has been AIB. Ulster Bank has announced plans to cut its mortgage rates for both new and existing customers but the size of the cuts will depend on the loan-to-value ratio homeowners have. It is introducing a new variable rate of 3.5 per cent for customers with a 60 per cent loan-to-value and 3.7 per cent for those with an 80 per cent loan-to-value.
Bank of Ireland has a standard variable rate of 4.5 per cent. PTSB has offered a change to its pricing that leaves it still charging a 4.3 per cent variable rate to borrowers above 90 per cent loan-to-value.
‘AIB recently announced it had raised substantial funds at a cost of just 0.66 per cent a year. This highlights the extraordinary low cost of debt for banks. It shows the extent to which mortgage customers are being ripped off,’ Mr McGrath said.
AIB and Bank of Ireland have already returned to profitability and PTSB is set to do so next year. Mr McGrath said this was welcome and in the interests of the State. ‘However the need for profitability is not a justification for ripping off mortgage customers.
‘As well as legislation to give the Central Bank the power to cap variable rates, we would require banks to treat new and existing customers equally,’ he added.
‘Every stalling tactic possible’