We may cut mortgage variable rate for our 140,000 customers - AIB boss
THERE was good news for 140,000 people with a variable mortgage at Allied Irish Banks after chief executive David Duffy said the lender may cut borrowing costs for mortgage holders.
Duffy said rates for borrowers on a variable mortgage could be cut as early as June.
Duffy justified the high rates charged at present, saying the bank also had to pay high rates to borrow.
He added that the bank's charges reflect its costs but these are now falling, potentially enough to justify a reduction in rates in June.
"If we see the same positive trends then we will be in a position to cut the rates," he said.
The bank's out-going chief executive made the comments as he gave evidence to the Oireachtas Finance Committee.
The comments came after it emerged that Irish householders on variable mortgages pay almost twice what their counterparts elsewhere in Europe pay to borrow money.
The banks need to charge the high rates to make up for loss-making tracker mortgages held by two thirds of the country's mortgage holders.
Duffy said the decision on a cut will depend on the bank's financial results, which will not be known for the next month or two.
He said the bank has to consider all factors regarding funding including the cost of borrowing and the risk of arrears.
Duffy blamed the media yesterday for reports that the banks plans to step up repossessions. Still, he admitted that the bank has taken more than 5,700 people to court in order to get them to pay their mortgages on their homes.
AIB accounts for about 140,000 of the country's 300,000 standard variable mortgages.
Mr Duffy said the bank has no position on whether the Government should reduce the length of bankruptcy from three to one year, but does not see any "fundamental problem" with such a change.
Finance Minister Michael Noonan met Central Bank Governor Patrick Honohan recently to see if pressure can be brought to lower variable rates.
Mr Noonan said yesterday that he will discuss cutting variable mortgage rates with lenders in the coming weeks.
The Finance Minister added that "analytical work" is being conducted on what the interest rate should be "if it was to be reduced".
"I'm expecting the results of that in the next couple of weeks, and then I will meet all the six lenders who contribute most to the Irish mortgage scene - I'll meet them in the next couple of weeks," he said.