The CEO of Bank of Ireland has said the bank deliberately kept its variable mortgage rate high in order to incentivise customers to switch to more attractive fixed rate offerings.
Speaking at the Oireachtas Finance Committee, Richie Boucher said it was a carefully considered strategy on the bank's behalf.
"We are deliberately incentivising customers to move to fixed rates. The borrower gets certainty on what they repay and we get certainty from our point of view," he explained.
"It does bind you for a period, but it's not for the lifetime of the mortgage."
The committee heard that about three quarters of Bank of Ireland's new lending in the mortgage area was in the form of fixed rates.
Mr Boucher said the move was to cut out interest rate risk.
"We believe the current interest rate environment is abnormal. There has been a material shift in bond yields.
"If anyone is taking out a 20-year mortgage and they don't believe rates will rise, I would ask them should they be making the investment," he said.
Mr Boucher was asked by Fianna Fáil's Finance spokesman Michael McGrath how he could justify charging a variable rate of up to 4.5% when the bank's cost of funds was less than 0.75%.
Mr McGrath asked if the bank was informing its customers that savings were available if they switched.
Richie Boucher said the bank provided details of its rate offerings in its statements, but that it could not actively encourage a customer to switch from one product to another.
Earlier Mr Boucher said Bank of Ireland has seen a surprisingly benign impact on its business customers from Brexit but still believes it will be drag on the economy.
He said he does think there will be a “negative impact on our economy from Brexit... However we have been surprised to slightly positive about the lack of a real impact to date both in our British business and Irish businesses.
"In talking to our business customers in particular, a lot of them have been through heavy, heavy cost reductions (during the financial crisis) and their businesses are much more efficient. Their risk of default has increased but it is relatively low. The impact has been surprisingly benign," Mr Boucher added.
