THE EBS has announced it is to reduce its standard variable rate by 0.25 of a percentage point in line with the reduction announced by the European Central Bank.
The move will mean the rate falls from 4.93 per cent to 4.68 per cent from the beginning of next month. Monthly repayments on a loan of €100,000 will fall by €14.
The ECB reduced its key interest rate by 25 basis points to 1.25 per cent last Thursday, in response to the deteriorating economic outlook for the euro zone.
The EBS joins Permanent TSB, KBC, Irish Nationwide (now part of the Irish Bank Resolution Corporation, formerly Anglo) and Bank of Scotland in announcing their intention to cut variable rates in line with the move.
Bank of Ireland and Allied Irish Banks have yet to indicate if they intend to follow suit.
Banks are obliged by contract to pass on rate cuts to tracker customers, but maintain discretion over standard variable rate loans.
Variable rate mortgages account for 30 per cent of the Irish market, which corresponds to 207,000 mortgages. Of the variable rate market, 50 per cent is held by the five lenders covered by the State’s bank guarantee: AIB, Bank of Ireland, EBS, Permanent TSB and the Irish Bank Resolution Corporation.
Ulster Bank has already indicated it has no plans to change its rate despite the ECB move.
Meanwhile, Danske Bank-owned National Irish Bank has defended a decision to proceed with a move announced last month to increase its variable rates by up to 0.95 per cent.
Some reports suggested the bank was acting in defiance of the Financial Regulator Matthew Elderfield who last week said he believed banks should pass on the ECB cuts to variable rate customers. However, NIB pointed out that it was its first increase since 2008 and added that its rates were not set according to the ECB’s position because it sources its funds through Denmark, which is not part of the euro zone.
“The changes were part of a broad restructuring of the bank’s interest rates on savings and lending products,” the company said. “They are the first changes we have made to our variable home loan rate since 2008 and are being made because the bank cannot continue to absorb the elevated cost of term funding. The changes in no way relate to any ECB interest rate fluctuations as the bank does not rely on the ECB for funding. We did not change our variable rate products when the ECB rate increased twice earlier this year.”
The Central Bank does not have the power to compel lenders to change rates but Taoiseach Enda Kenny has said he would consider changing legislation if lenders failed to pass on rate reductions.
