Permanent TSB has confirmed that it is raising the interest rates on its standard variable mortgages and related products by 0.5pc from the start of February.
As a result, the new rate for customers holding standard variable mortgages is 3.69pc.
Permanent TSB said the move would affect just under 80,000 residential mortgage customers, who make up 45pc of its residential mortgage loan book. Its other 100,000 residential mortgage customers will not be affected.
High cost of funds
The bank said the decision to increase rates had been forced on it as a result of the continuing high cost of funds.
“While the bank sources funds from a variety of sources, the overall cost of funds continues to be substantially higher than the official ECB interest rate. For example, Permanent TSB is currently paying up to 3.35pc for retail deposit funds. This is higher than the bank’s standard variable rate mortgage of 3.19pc,” the bank said.
“Clearly it’s not sustainable for the bank to be paying more for the raw material [money] than it can charge for the finished product [mortgage],” it added.
Standard variable mortgage still cheaper
Permanent TSB said its standard variable residential mortgage customers have an average mortgage outstanding of €62,500 and that the interest rate rise announced today will add €15 per month on a customer’s repayments.
The bank claimed that, despite today’s increase, its standard variable rate mortgage is still cheaper than “many competitors” in the market.
Face up to financial challenges
Commenting on the rate rise today, the Chief Executive of Permanent TSB David Guinane said: “We will of course work closely and sympathetically with any customer who has financial difficulties but we must face up to our own financial challenges also.
“To persist with uneconomic margins on this product at a time when the bank is losing money would be irresponsible and would result in larger problems down the line,” he added.