As the Deputy will be aware the Relationship Framework with the banks provides that the State will not intervene in the day-to-day operations of the banks or their management decisions. This framework is published on the Department of Finance website. I must ensure that the bank is run on a commercial, cost effective and independent basis to ensure the value of the bank as an asset to the State, as per the Memorandum on Economic and Financial Policies agreed with the EU Commission, the ECB and the IMF. Neither the Central Bank nor the Department of Finance has a statutory function in relation to interest rate decisions made by individual lending institutions at any particular time. It should also be noted that the Relationship Framework references decisions regarding pricing as being commercial decisions for the banks.
With regard to AIB and PTSB the state owned institutions I have been supplied with the following details with regard to mortgage rate increases over the last two years.
AIB
The ECB rate changed 6 times since 2011, 2 increases and 4 decreases. In the same period, AIB variable rates changed 4 times, 1 decrease and 3 increases with an overall net increase of 1.15% for Standard Variable Rates (SVR’s). The gap between the average AIB variable mortgage interest rate and tracker mortgage interest rate is currently 2.5% or 3.1% effective from 5th June 2013.
|
ECB Rate Changes
|
-
|
AIB SVR & LTV Variable Rates
|
-
|
|
-
|
-
|
PDH SVR
|
PDH LTV Variable
|
|
New Rate
|
AIB Effective
|
Change
|
New RateChangeNew Rate
(Range from)
|
|
1.25%
|
n/a
|
unchanged
|
3.25%unchanged3.09% to 3.49%
|
|
1.50%
|
n/a
|
unchanged
|
3.25%unchanged3.09% to 3.49%
|
|
1.25%
|
22/11/2011 - 03/09/2012
|
-0.25%
|
3.00%-0.25%2.84% to 3.24%
|
|
1.00%
|
n/a
|
unchanged
|
3.00%unchanged2.84% to 3.24%
|
|
0.75%
|
n/a
|
unchanged
|
3.00%unchanged2.84% to 3.24%
|
|
|
04/09/2012 - 12/11/2012
|
+0.50%
|
3.50%+0.50%3.34% to 3.74%
|
|
|
13/11/2012 – present
|
+0.50%
|
4.00%+0.50%3.84% to 4.24%
|
|
0.50%
|
-
|
-
|
-
|
|
-
|
Effective from 05/06/2013
|
+0.40%
|
4.40%+0.25%4.09% to 4.49%
|
EBS
The gap between the average EBS variable mortgage interest rate and tracker mortgage interest rates is currently 2.6% or 3.1% effective from 1st June 2013.
|
ECB Rate Changes
|
-
|
-
|
EBS PDH SVR
|
-
|
-
|
|
ECB Change
|
Change
|
New Rate
|
EBS Effective
|
Change
|
New Rate
|
|
-
|
-
|
-
|
01/04/2011
|
+0.60%
|
4.43
|
|
April 2011
|
+0.25%
|
1.25%
|
01/05/2011
|
unchanged
|
4.43
|
|
Jul 2011
|
+0.25%
|
1.50%
|
01/08/2011
|
+0.25%
|
4.68
|
|
-
|
-
|
-
|
01/10/2011
|
+0.25%
|
4.93
|
|
Nov 2011
|
-0.25%
|
1.25%
|
01/12/2011
|
-0.25%
|
4.68
|
|
Dec 2011
|
-0.25%
|
1.00%
|
01/01/2012
|
-0.35%
|
4.33
|
|
Jul 2012
|
-0.25%
|
0.75%
|
01/08/2012
|
unchanged
|
4.33
|
|
May 2013
|
-0.25%
|
0.50%
|
01/06/2013
|
+0.25%
|
4.58
|
PTSB
As of today, 8 May 2013, Ptsb svr rate is 4.34%.
Since 21 November 2011, the svr rate has dropped 1.35% from 5.69%. The svr rate was reduced as follows
- 0.25% on 21 Nov 2011
- 0.25% on 29 Dec 2011
- 0.50% on 14 May 2012
- 0.35% on 30 July 2012
Since 13 July 2011, the ECB rate has dropped 1.00% from 1.50% to 0.50% as follows
- 0.25% on 2 Nov 2011
- 0.25% on 7 Dec 2011
- 0.25% on 4 July 2012
- 0.25% on 2 May 2013
In relation to the gap in the spread between tracker and svr, it must be noted that not everyone on a tracker mortgage has the same tracker rate; the margin over ECB ranges from 0.45% to 3.35% so the interest rate on these loans ranges from 0.95% to 3.85% (margin + ECB rate).
The average margin on a tracker rate is 1.25 % meaning that the interest rate as of today including the latest ECB rate reduction is 1.75 %; 2.59% less than the current svr rate.
