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Banks respond to higher-than-expected ECB interest rate hike

Tracker mortgage rates will be affected by the change which BoI says will take effect for most customers on August 10th
Tracker mortgage rates will be affected by the change which BoI says will take effect for most customers on August 10th

Bank of Ireland has confirmed that it will not be passing the ECB's 0.5% increase in interest rates onto its variable rate mortgage customers.

Its fixed rate offerings will also be unaffected by the move.

However, tracker mortgage rates will be affected by the change which the bank says will take effect for most customers on August 10th.

The bank says it will write to all tracker mortgage customers confirming the new interest rate - which will now be 0.5% higher the previous rate - the effective date, and their new repayment amount.

It also confirmed that where negative rates were applied to customer balances, that will come to an end from August 3rd.

Late last year, Bank of Ireland reduced the threshold at which it charges negative rates to €1 million.

The bank had been charging a rate of 0.65% on such large deposits.

AIB has in recent months been charging negative rates to its customers with deposits in excess of €1 million at a rate of 0.75%.

It didn't indicate today if this policy would end with the hike in rates announced by the ECB.

It also didn't clarify whether or not it would pass the rate hike onto variable rate mortgage customers.

However, at 3.15% on a mortgage with a loan to value (LTV) of greater than 80%, AIB's variable rate offering is lower than Bank of Ireland's at 4.5% and Permanent TSB's, which sits at around 4%.

AIB said customers with a tracker mortgage linked to the ECB rate would be contacted about changes to their interest rate being applied in line with their contract.

"We continue to keep our rates under review," the statement added.

Permanent TSB confirmed that it would not be passing the rate increase onto its fixed and variable rate mortgage customers.

"We are pleased to provide reassurance to our personal fixed and variable rate mortgage customers that we have no plans to pass on today's ECB rate increase," Eamonn Crowley, CEO of Permanent TSB said.

"We will keep our position under review in light of any further market changes," he added.

Tracker mortgage rates will automatically rise following today's rate hikes, the bank said.

Ulster Bank said it would be writing to tracker mortgage customers to let the know about their new rates, but did not indicate any changes to its other rates.

While KBC said it regularly reviews rates as part of normal business activities and notes the ECB announcement today.

It also said any direct impact of rate changes triggered by the ECB will be applied.

"KBC Bank Ireland will communicate any changes to customers in writing in line with all legal and regulatory protections," it said.

Finance Ireland said it monitors rates on an ongoing basis, but it didn't signal any changes today.

It is understood variable rate customers make up a small proportion of its overall book.

Spokespeople for Avant Money and Dilosk, which trades as ICS, said they were not making any pricing announcements today.