The CEO of AIB, Colin Hunt, has addressed concerns about potential increases in mortgage arrears in the future. While there has not been a significant spike in arrears levels at present, Hunt acknowledged that this situation may change. Hunt’s comments were made during a meeting with the Oireachtas Finance Committee following AIB’s decision to raise the cost of its five-year fixed-rate mortgage to 5% in late June.
Mortgage customers across various lenders have seen their lending rates increase 10 times since last summer. Hunt highlighted the potential challenges that rapid interest rate increases pose to mortgage customers, despite the fact that approximately 60% of AIB’s customers are currently on fixed rates. He assured the committee that no significant increase in arrears has been observed so far, but emphasized the need for ongoing monitoring.
The committee also raised concerns about increased mortgage rates and what they perceived as a reluctance to raise deposit rates by AIB, Bank of Ireland, and Permanent TSB. Eamonn Crowley, CEO of Permanent TSB, acknowledged that rising European rates have made fixed and variable rates more comparable. He stated that this can influence customer behavior as they reassess the attractiveness of fixed rates compared to variable rates.
Bank of Ireland group CEO Myles O’Grady emphasized the bank’s efforts to prevent customers from being burdened by rate rises. While the ECB has increased rates by 4.5%, Bank of Ireland has raised fixed rates by up to 1.75% to balance the impact. O’Grady highlighted that they have introduced savings rates of up to 3% as well.
Brian Hayes, CEO of the Banking and Payments Federation Ireland, defended the actions of Irish lenders, stating that they have taken a balanced approach in passing on interest rate increases. He compared the rates passed on to mortgage holders in Ireland to those in other Eurozone member states, noting that Irish banks have implemented one of the lowest increases. The average rate on new mortgages in Ireland has only risen by 1.24 percentage points, less than a third of recent ECB increases, according to Hayes.
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