Homeowners with standard variable mortgages (SVR) look set to benefit from reduced interest rates from July.
Minister for Finance Michael Noonan said he had met with the country’s main six lenders - AIB, Bank of Ireland, Permanent TSB, Ulster Bank, KBC and ACC - to discuss “the comparatively high standard variable rates currently being charged by the banks”.
Mr Noonan said there was agreement from all lenders that customers should have access to more competitive mortgage products.
At a press conference outside Government Buildings today, Mr Noonan said he has given the six banks until July 1st to make their announcements as to how they will reduce the cost of standard rate variable mortgages for customers.
“All of them in one way or another will offer an option to each holder of a mortgage to get a reduced rate,” he said.
In some cases, this will involve a straight rate cut but in others it might involve offering a lower fixed-rate to a customer.
“We’ll expect announcements from the banks in their own time between now and the first of July.”
Mr Noonan also wants the banks to conduct publicity campaigns to inform customers of their options in securing a lower rate.
He suggested that interest rates are probably at the bottom of the cycle currently and that borrowers should seriously consider fixing with their bank.
Mr Noonan said there was a “growing belief” that the margin being charged by banks for standard variable rate mortgages was “too wide and that there is scope for a reduction”. He said the banks were “expected to make moves” but he was “not prescriptive” about the rates that should be charged.
The minister said he also “reminded” the banks that Senator Feargal Quinn’s bill to give powers to the Central Bank of Ireland to fix interest rates has now been published in the Senate and that the Government does not have a majority in the Seanad.
The minister said there are potential competition issues arising from the six banks all moving at the same time to offer lower rates to customers and he doesn’t want them all to make the same cuts. “I want them to compete with each other across a range of products,” he said.
Mr Noonan warned that a “severe, penal” bank levy in the Budget could be introduced if the banks don’t reduce their rates. He would also consider giving the Central Bank powers to fix rate. He said neither option was “particularly good” and he would prefer the banks to move on rates themselves.
“As long as they move we won’t have to take further action,” the minister said, adding that it was in the interest of all the banks to “look after their customers”.
The minister said another rate cut by AIB, in addition to the two it has pushed through in the past six months, should not affect its profitability or damage the prospects of the State selling some of its 99.8 per cent stake to private investors.
“Happy customers make for profitable banks,” he said. “I don’t see any change in our intention or our policies about selling AIB.”
In terms of the timing of a possible IPO, he said the first window would be late this year, “probably November…then a window will open up again in the Spring”.