Banks keep mortgage rates ‘under review’

• Published date: 30 June 2022

Meanwhile, Minister for Finance Paschal Donohoe said a new Labour Party Bill that would give the Central Bank powers to cap variable mortgage rates would be a "recipe for creating further and bigger difficulties in future" for competition. The proposed law replicates a failed Bill that was introduced by Mr Donohoe's Cabinet colleague Michael McGrath when he was in opposition in 2016

PTSB chief executive Eamonn Crowley said on Friday that his bank may absorb the first two rounds of ECB interest rate hikes and not increase mortgage pricing in a bid to grow its market share. He added that Irish banks "can withstand for a portion of time some of those interest rate increases".

Spokesmen for AIB and Bank of Ireland declined to give an indication of their mortgage pricing plans when the ECB raised rates, with each telling The Irish Times that that their groups keep fixed and variable rates under review.

Analysts at Deutsche Bank said in a report last week that Irish banks would be among the main winners in the industry across the euro zone from rising interest rates. However, the earnings benefit will be driven by the banks no longer being charged negative rates for billions of euro of excess deposits they store with the ECB, rather than mortgage rate increases, they said.

The ECB's deposit rate is currently at minus 0.5 per cent, while its main lending rate has been set at zero since 2016. The ECB has signalled that it will increase both by 0.25 percentage points next month, with a further increase widely expected in September.

Fixed-rate mortgages have been by far the most popular product in the Irish market in recent years and made up 44 per cent of outstanding home loans as of the end of last year, according to Davy analyst...