IL&P move to increase rate draws condemnation
DAVID LABANYI and JASON MICHAEL

The Minister for Finance has expressed "disappointment" at a decision by Irish Life & Permanent to increase the interest rate it charges mortgage holders but ruled out removing the State guarantee from the institution.

The decision to increase rates by one of the largest mortgage lenders in the State, Irish Life & Permanent has drawn widespread condemnation this morning.

It prompted Siptu to call on Brian Lenihan to remove the State guarantee from IL&P and other lenders who increase mortgage rates outside a decision by the European Central Bank.

Mr Lenihan said were he to remove the guarantee, it would "mean even higher costs for mortgage holders."

"This illustrates the benefits of the State guarantee to mortgage customers. Permanent TSB are paying the State for the benefit of this guarantee."

Mr Lenihan added: "Unfortunately this increase reflects commercial market realities including the increased cost of accessing funds."

In adverts in the national media today Permanent TSB said it will increase the standard variable rate it charges by half a percentage point to 3.19 per cent from Monday.

Siptu general president Jack O’Connor said in a statement this morning he would write to Mr Lenihan asking for him to “indicate to banks guaranteed by the Irish taxpayer that he will withdraw the guarantee from them if they press ahead with increases in interest rates”.

“Apart from the sheer immorality of increasing interest rates it will further exacerbate our overall economic problems, further damaging consumer confidence and reducing consumer demand, thus jeopardising even more jobs in the economy,” he said.

Fine Gael leader Enda Kenny described the decision as an "abuse" of the State's bank guarantee. "Remember, these banks owe their very existence to the Irish taxpayer . . . Brian Lenihan should call in Permanent TSB this morning and demand an explanation as to what this is all about," he said.

Mr Kenny questioned whether the Minister for Finance was informed of the step in advance. "You can't have a situation where banks under the guarantee are allowed to expand and extend their profits, and in particular where banks have been recapitalised by the Irish taxpayer and where the Minister has members on their boards."

Mr Kenny, who noted Permanent TSB had not been recapitalised by the State, said he had heard rumours that other institutions could follow with interest-rate rises.

"The Minister for Finance has very extensive powers under the legislation passed by the Dáil, and this morning he should have TSB in before him," he said on Morning Ireland .

The IL&P change could see repayments on a 30-year mortgage for €300,000 rise by about €70 a month.

According to Permanent TSB, the average monthly repayment increase will be just €14.75, as the size of the average affected mortgage is for €62,500, with 13 years remaining.

The change will not apply to holders of a tracker mortgage.

An IL&P spokesman said last night it had passed on all ECB rate reduction – when its competitors had not – and that the high cost of funds was not declining.

Labour Party deputy Sean Sherlock described the decision by IL&P as an “act of incredible arrogance”. Mr Sherlock said it would be a matter of concern if other lenders followed suit.

Elsewhere, Fianna Fáil TD Frank Fahy, who sits on the Oireachtas joint committee on Finance and the Public Service, called on mortgage holders not to pay the additional charges.

Speaking on RTÉ's Pat Kenny Show , Mr Fahey said that it was "unacceptable for the Irish banking system to take unilateral action to start increasing rates themselves. It's at the point where ordinary people have to stand up to the banks."

Earlier this week Fitch today downgraded its individual rating on IL&P due to concern over the company’s profitability over the next two to three years.

Fitch said while IL&P’s loan book contained fewer risks than those of its peers the “operating environment has significantly deteriorated which Fitch expects to lead to falling revenues and larger loan impairment charges, causing profitability to shrink”.

Public abuse staff over mortgages

A trade union has claimed its members are “bearing the brunt” of the public’s anger following the decision by Permanent TSB to raise mortgage interest rates today.

Unite, who represent over 1000 workers in the bank, said staff had been physically threatened and spat upon as customers vent their anger over the raise.

Colm Quinlan of Unite said while anger at the decision is “understandable” people should bear in mind that staff “had no input to the decision, no prior knowledge of it and are doing their job in trying circumstances.”

He said: “It is wrong that no provision was made for briefing staff on how to handle what was obviously going to be a very strong backlash from the general public.

“We have made management aware of our concerns in this regard and once again would ask that the public respects the personal dignity of regular workers.”

Mortgage rate rises likely as Lenihan refuses to act

HARRY McGEE, ARTHUR BEESLEY and CAROLINE MADDEN

The Government expects the main Irish banks, each of them beneficiaries of the State guarantee scheme, to swiftly follow Permanent TSB’s controversial move to increase its mortgage rates.

In the face of strident political and trade union opposition to the Permanent TSB decision, the other big lenders declined to reveal their plans. However, they left open for themselves the option of a similar move.

Last night it emerged that the Government, which rejected calls for Permanent TSB to be removed from the guarantee scheme, knew in advance that it planned to raise its standard variable rate by half of one per cent.

“We were advised about their intentions. They set out the rationale behind the decision to us,” said a spokesman for Minister for Finance Brian Lenihan.

AIB said its mortgage rates were being kept under review “given continuing high cost of funding”. Bank of Ireland said it had “no plans to introduce changes” but added that all rates remain under review.

Ulster Bank said its rates were “constantly under review” but said it had no current plans to increase them. The EBS said it was “very aware of the pressures in the market and continue to review our rates” but had no plans to increase them.

However, senior Government sources expect other lenders to raise their rates by the same percentage as Permanent TSB in the near future. The sources said the argument was made that Permanent TSB’s interest rates had been at unsustainably low levels in recent times.

They also pointed to the bank’s high level of tracker mortgage accounts, in which interest rates are contractually tied to European Central Bank rates, as well as the higher charges the bank was paying to access funds on the international money markets.

Many Irish home-owners have been insulated to some degree from the effects of tax increases and pay cuts as a result of a succession of rate cuts from the European Central Bank. Government sources also said mortgage interest rates remained at historically low levels and were much lower than rates in Britain and the US.

Permanent TSB, a unit of Irish Life Permanent, said the measure was required to support its business at a difficult time. “Permanent TSB will lose money this year and we regretfully have had to make this decision in order to minimise losses,” said David Guinane, the Permanent TSB chief executive.

Fine Gael leader Enda Kenny rejected the bank’s argument and said he regarded the rate increase as “an abuse of the taxpayers’ guarantee” to deposits. “These banks owe their existence to the Irish taxpayer,” Mr Kenny told RTÉ.

Siptu president Jack O’Connor said it was immoral for the bank to raise rates at this time, adding that the move would jeopardise jobs in the wider economy by damaging consumer confidence.

Mr O’Connor’s call for the withdrawal of Permanent TSB’s State guarantee was rejected by Mr Lenihan. He also ruled out any Government intervention to force a reversal from the bank.

“I am disappointed by Permanent TSB’s decision to increase their variable interest rates but unfortunately this increase reflects commercial market realities including the increased cost of accessing funds,” Mr Lenihan said.

“The proposal to withdraw the State guarantee from banks that increase their interest rate costs would mean even higher costs for mortgage holders. This illustrates the benefits of the State guarantee to mortgage customers. Permanent TSB are paying the State for the benefit of this guarantee.”

Labour TD Seán Sherlock said Permanent TSB’s move was “an act of incredible arrogance, which shows little appreciation of the lengths to which the State and Irish taxpayers have gone to rescue the financial institutions from the results of their own recklessness and mismanagement”.

While Sinn Féin TD Arthur Morgan said that Mr Lenihan’s remarks were “breathtakingly arrogant”, there was also criticism from the Government backbenches.

Fianna Fáil TD Chris Andrews condemned the decision as a “callous move” which would place mortgage holders already struggling with repayments under severe pressure.

Iniciado por Serpiente_Plyskeen

En un movimiento un tanto extranho, y justificandolo diciendo que "se han incrementado los costes para encontrar financiacion" (????Con los tipos de interes al 1% y el euribor bajando????), un semibanco irlandes (Irish Life and Permanent) ha subido los diferenciales un 0.5% en sus hipotecas:

Permanent TSB picketed over rates
Members of the People before Profit Alliance outside a Permanent tsb branch today.


Photograph: Cyril Byrne/The Irish TimesMembers of the People before Profit Alliance outside a Permanent tsb branch today. Photograph: Cyril Byrne/The Irish Times

SHANE MURRAY

The People Before Profit Alliance picketed a Dublin city centre branch of Permanent TSB today to protest against the increase in mortgage rates.

A small group of protesters stood outside the bank on O'Connell Street holding placards proclaiming “We won’t pay for the greed of the Super Rich” and “Sack This Government”.

They also handed out leaflets and asked people to sign a petition denouncing the rise in rates and Minister for Finance Brian Lenihan’s refusal to block the actions of the bank, which increased its standard variable rate by half of one per cent last week.

The alliance claimed that the interest rated rise is unfair, as it puts pressure on taxpayers, who have already had to bail out the banks. Permanent TSB is protected through the State guarantee scheme.

“This institution owes its existence to the taxpayer,” Dún Laoghaire-Rathdown councillor Richard Boyd Barrett said. “Without the guarantees provided by the taxpayer is would go out of business. “Brian Lenihan is a disgrace. He is not even prepared to give them a slap on the hand for imposing misery on ordinary families."

Dublin City councillor Bríd Smith claimed the Government’s failure to act had opened the way for other banks to increase mortgage rates.

She rejected Mr Lenihan’s claim that Permanent TSB was simply reacting to the reality of the current market.

“Market realities are what led to this situation, to us bailing out the banks to the tune of €20 billion. If the State can intervene to save the banks, then it can intervene now to stop the banks from crucifying people. To say it’s ‘market realities’ is not a good enough reason.”

AIB hints at future rate increase
29/07/2009

Allied Irish Bank has no immediate plans for an interest rate hike but its mortgage repayments will increase at some stage in the future, its managing director said today.

Robbie Henneberry said the bank’s standard variable rate for mortgages was well below the average and would inevitably have to rise.

Addressing the Oireachtas Joint Committee on Enterprise, Trade and Employment today, Mr Henneberry said there was no present plan to follow in the footsteps of Permanent TSB which sparked an outcry over the weekend with a 0.5 per cent hike, increasing monthly repayments by up to €70.

“At this point in time we have absolutely no intention of increasing our rates in the standard variable market,” he said. “That will not persist forever because market forces will dictate at some stage in the future when this economic cycle improves and interest rate cycle changes, that that will change.”

Mr Henneberry said AIB has 40,000 customers on a standard variable rate mortgage, which represents one in three mortgages in the State.

Paving the way for a future hike, he compared AIB’s 2.25 per cent rate with the 4 per cent charged by some of the UK’s main lenders.

“We are at a low point in the interest rates cycle and at some time it is inevitable that they will increase,” he told a parliamentary committee.

Public outrage over the hike by Permanent TSB, which is covered by the State bank guarantee scheme, led to cashiers being threatened and even spat on, according to union leaders.

Unite, which represents 1,000 staff, said at least 10 workers reported being verbally abused and physically threatened in branches around the country.

The move sparked fears that other lenders would follow suit.