Experts call on Dublin’s profitable banks to desist from adding interest rate hike

by Rose Barrett
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Rose Barrett

 Labour spokesperson on Finance Ged Nash has called on Ireland’s profitable banks to desist from passing interest rate hikes onto Irish and especially Dublin mortgage holders, already stretched to the limit.

“The main retail banks have seen a huge boost to their incomes in terms of the money they hold on deposit,” he said. “AIB, Bank of Ireland and Permanent TSB are doing very well in an environment which has seen a total of six ECB rate rises in under a year.”

He continued: “Our banks are profitable, are well capitalised and liquidity is not an issue. All the advice from analysts and regulators indicate that the Irish banking system will not ship any significant damage in the fallout from the Silicon Valley Bank affair or the turbulence experienced at Credit Suisse. But we know that last week’s interest rate rise will have an impact on the 200,000 homeowners on tracker rates.

“With the main lenders in the Irish market in a healthy state, there is no case to be made for the banks passing on the interest rate rise to the 200,000 or so householders with variable rate mortgage holders.”

Clare Connolly MD of Clare Connolly Estate Agents and The Collection

He felt the ECB should be agile enough to respond to the prevailing conditions – and keep inflation down while at the same protecting Irish jobs, businesses and investment.

Clare Connolly (IPAV) is MD of Clare Connolly Estate Agents based in Dundrum and concurs with Deputy Nash’s call.

“On March 10 last,” she said “The collapse of Silicon Valley Bank was the greatest bank failure in the US since the financial crisis of 2008. Credit Suisse narrowly avoided collapse and was fortunately taken over by the Union Bank of Switzerland (UBS) on Sunday last. This action considerably reduced the stress in the global banking system and brought about financial stability to the market.”

While Christian Lagarde, head of the ECB has said the euro zone banks are resilient, he stated the ECB would step in if necessary.

“This was echoed by Goodbody Analyst, John Cronin who says that Irish banks are ‘flush’ with capital partially because the ECB demands that Irish banks carry additional capital in reserve to provide a cushion in the event of shock losses, a legacy of the downturn in 2008.”

Ms Connolly stated that given the strong financial position of our main Irish banks, they would consider holding off passing on the latest interest rate increase to their customers.

“It would provide such a sense of reassurance to the many Dublin mortgage holders faced with huge level of repayments. It is a tense and fearful time for all of us given the cost-of-living crisis, the high energy costs and continued rising inflation albeit at a slower pace.

“The potential lifting of the ‘Eviction Ban’ at the end of March will also have the effect of landlords leaving the market and selling up definitely in the short-term leaving many tenants potentially without a home given the non-existent supply of rental properties on the market.”

She concluded: “It is the responsibility of the individual banks to ensure that they are putting their customers first according to Gabriel Makhlouf, Governor of the Central Bank. Let’s hope the main banks will do just that and give the 200,000 or so Irish mortgage holders peace of mind by holding off on the most recent interest rate increase at least until towards the end of this year.”

Deputy Nash urged the main lenders to be “cautious, to understand the enormous cost of living challenge with inflation at 8.5 per cent and to put the interests of their mortgage customers ahead of stockpiling more cash.

“Despite a 3.5 per cent total rise in interest rates imposed by the ECB since last July, inflation has not been arrested as quickly as Frankfurt anticipated. The recent 0.5 per cent rise could easily have been 0.25 per cent but the ECB chose instead to proceed on the basis of its original plan” he said.

 *Clare Connolly Estate Agents won the National Property Award for Independent Estate Agent of the Year in 2022. She also manages ‘The Collection’, an exclusive selection of luxury villas, homes and estates for short term corporate letting, in sought after areas such as Dalkey and Killiney. She is also qualified as a CIPS (Certified International Property Specialist). See www.clareconnolly.ie 

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