FOUR BANKS have indicated they will not be passing on the 0.25 per cent cut in the ECB’s main rate which was announced yesterday, while a fifth will partially pass on the ECB cut.
The cut, which brings the ECB rate to 1 per cent, is due to take effect from Wednesday 14 December.
Anyone on a tracker mortgage, which follows the ECB’s base rate, will benefit from the reduction, but some banks have said they won’t be passing the cut on to other mortgage holders.
AIB has said that the bank’s funding costs are “no longer primarily determined by the ECB base rate” and as a result, it would not be passing the cut on to its other mortgage customers.
Defending its decision, the bank said that its mortgage portfolio is currently making a loss for the bank and that its costs are “more influenced by higher priced customer deposits and the continuing absence of a functioning wholesale market” than by the ECB rate.
AIB did not pass on the 0.5 per cent rate increase earlier this year, but did pass on the 0.25 per cent cut in November, after the government threatened to take action in pushing the banks to pass on the cut. Speaking in the Dáil yesterday, Tánaiste Eamon Gilmore echoed those threats, saying the government would act “forcefully” to ensure mortgage customers benefit from the cuts.
Ulster Bank will also not be passing on this rate cut, having refused to pass the last one on, while KBC and National Irish Bank are reviewing the situation. Bank of Ireland, which also refused to pass on last month’s reduction, says it will cut its rate by 0.15 per cent, instead of the 0.25 the ECB announced yesterday.
PTSB and EBS will both be cutting their variable rate by more than the amount by which the ECB rate is being reduced, down 0.71 and 0.35 per cent respectively.
Sinn Féin and Fianna Fáil have both called on the government to force the banks to pass on the rate cut, with SF TD Pearse Doherty accusing the government of hiding behind the financial regulator in failing to follow through on its earlier threats to push the banks into passing on the rate cut.
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