Blog – David McCarthy – Galway Talks – 02/05/2013


Question:  I am paying a variable rate on my mortgage of around 5%.  When compared to the ECB rate of 0.75%, this appears to be shockingly high.  Do you think there is a likelihood of reduction in mortgage rates this year?

Answer:  Irish banks are looking to raise revenue wherever they can, in order to restore themselves to profit ability.  Customers like yourself, who have variable rate mortgages, are being targeted with inordinate increases in interest rates.  With the lack of competition in the mortgage market, the option of switching your mortgage is limited.  Even if you could do so, the chances are that the new lender may also be charging this type of rate.

I do not believe that the interest rate on variable mortgages will be reduced anytime soon.

Issue:  AIB increases Variable Mortgage Rate, as possible reduction in ECB rate looms.

Comment:  The ECB announced a reduction in their interest rate of .25% to 0.5% today.  It is very hard to understand the increase in AIB’s rate last week in view of the ECB’s move.  As I have commented previously, AIB made this decision to increase rates in order to help their profitability, at the expense of the customer.

Question:  Can you please explain why Deposit Rates have fallen so much, when I see announcements by banks of increases in their lending rates?

Answer:  Deposit rates in Ireland were inordanarily over the last few years due to the need for banks to raise funds in the retail market.  When you look at an ECB rate of 0.5% it is not hard to see why Deposit Rates in Ireland have fallen so much recently.  The possibility of an increase in rates in the foreseeable future is virtually “nil”.

Question:  I have been in a pension plan with my current employer for many years.  What happens to this is if I leave my current employer?

Answer:  When you leave an employer, most people move their pension benefits into a Personal Retirement Bond.  This bond gives you control over how these monies are invested and you have a variety of options in this regard.  The rules regarding retirement however do not alter.