IFA says the huge variation in interest need to be explained

IFA Farm Business Chair Bill O’Keeffe has highlighted the ongoing issue of the variations in interest rates between Irish lenders.

“At the moment farmers who have loans with the likes of AIB and MilkFlex are incurring interest rates of up to 3% and more above what is available with other lenders.

“A 3% higher interest rate on a €50,000 loan, over 7 years, adds €5,500 to the total cost of the loan,” Bill O’Keeffe said.

“As we have seen in the recently released CSO figures for 2023, the operating surplus in agriculture declined by 36% compared to 2022. This means farmers are operating on razor thin margins and can ill afford to be paying exorbitant interest rates,” he added.

IFA has already engaged with these financial institutions seeking justification for the wide disparity in what they are charging compared with other lenders in the market.

“We have spoken to these lenders and their response is that they are using a different internal method of pricing their cost of funds compared with other lenders. This is simply not good enough,” Bill O’Keeffe said.

“All lenders are operating in the same market but some expect farmers to shoulder substantially higher interest rates – it just doesn’t add up. I would encourage all farmers to shop around for any new lending they are planning and to review the rates and terms they are paying on existing lending. If there are better rates out there, they should consider moving, if it makes financial sense,” he said.

“I am asking all lenders to review their interest rates for farm lending. We are in a massive income squeeze with ever tightening margins and cannot afford to be paying artificially inflated interest rates for loans. The Central Bank also need to make it easier for farmers to move lenders by making the process of moving banks more streamlined and less costly,” Bill O’Keeffe concluded.