Banks accused of ‘shafting’ home buyers and savers on interest rates

BANKS have been accused of “shafting” consumers after it emerged that savers in this country are getting seven times less in interest than people with money in banks across the eurozone.

This is despite Irish banks charging the second highest mortgage rates in the currency bloc.

The average mortgage rate being charged to first-time buyers rose here last month, pushing the gap between rates charged here and in the rest of the eurozone wider.

A typical first-time buyer in this country is paying almost €170 more a month than the average paid by new buyers in the 19 countries that make up the single currency.

The poor savings interest rate being paid, while mortgage holders are paying high rates, has been condemned as a rip-off.

New figures from the Central Bank show that savers here are getting a very poor deal, with interest rates close to zero.

A lump sum saved in a bank or credit union here will generate an annual interest payment of just 0.05pc before tax, the figures show. This would mean €1,000 saved for a year would generate just 50c in interest, before tax.

This is 6.6 times lower than the average across the eurozone which is 0.33pc.

Mortgage rates here are the second highest after those charged by Greek banks.

Daragh Cassidy of price comparison site Bonkers.ie said first-time buyers in Ireland are paying over €173 more on average each month compared to eurozone average.

“You can’t help but feel Irish consumers are being shafted,” he said.

“As well as having to contend with some of the highest mortgage rates in the eurozone, we’re also being hit with some of the lowest saving rates.”

There was a slight increase in the average interest rate charged on new mortgages issued in August despite falling rates across the zone.

At 2.99pc, the rate is up from 2.98pc in July. But the average rates in the eurozone fell to a new series low of 1.48pc.

Mr Cassidy said figures from the Banking and Payments Federation Ireland show that the average first-time buyer mortgage in Ireland is around €225,000. This means a firsttime buyer here who takes out a mortgage of this size over 30 years is paying on average over €173 more each month.

Over a year, this works out at almost €2,100 a year more being paid here.

Banks here blame higher levels of arrears and the difficulty repossessing properties, where the mortgage is not being paid, for the high lending rates and near-zero deposit interest.

Banks here are required to set aside more capital than their eurozone counterparts when they issue a mortgage.