Oireachtas Joint and Select Committees

Tuesday, 6 February 2018

Joint Oireachtas Committee on Finance, Public Expenditure and Reform, and Taoiseach

Tracker Mortgages: Permanent TSB

4:00 pm

Photo of Michael McGrathMichael McGrath (Cork South Central, Fianna Fail) | Oireachtas source

Sure. The non-tracker question is a related one because the issue is who ultimately is paying for all of this. I, therefore, want to raise the issue of mortgage pricing again with Mr. Masding. I have put it to him before that his bank's mortgage rates are very high. For a long time the bank was not offering a fixed-rate option to existing customers. He committed to the committee that the bank would introduce one and it did, but it is not the same as that available to new customers. For example, for an existing customer the two-year fixed rate is 4.2% while the two-year fixed rate for a new customer varies, depending on the loan-to-value ratio, from 3.2% to 3.6%. That is up to 1% less. No loan-to-value differentiation whatsoever is made for the existing customer on fixed rates. That is clear discrimination against existing customers. Similarly, as I understand it, Permanent TSB customers can revise their managed variable rate once and this can bring them to a rate of between 3.7% and 4.3%. Therefore, the lowest managed variable rate an existing customer with Permanent TSB who has a low loan-to-value ratio can get is 3.7%. The corresponding rate with AIB is 2.75%.

My point is that Permanent TSB's customers who are unable to switch, which could be for a whole host of reasons such as loss of employment, reduced income or change in family circumstances, are stuck. They are stuck with Permanent TSB and they are goosed. The bank is crucifying them with the interest rates it is charging. When I look at the bank's most recent financial results for the half year to June 2017, the bank's wholesale funding costs were 0.08%, which is eight basis points, and its customer deposit pricing was 0.17%, which is 17 basis points, yet the bank is still charging some customers a managed variable rate of up to 4.3% and fixed rates of 4.2%.

The only reason existing Permanent TSB customers would not now switch is that they are stuck, and anyone who could should. That is a pretty stark position for the bank to be in. As a bank, it is marginally profitable and Mr. Masding might argue that mortgage pricing is as good as it gets and that the bank cannot do any better. If that is the case, it raises more fundamental questions. It is not good enough, however. The bank continues to discriminate against its existing customers vis-à-vis its new customers and overall its rates are way out of line with its cost of funds. Its net interest margin has increased to 1.81%. We will wait for the full year results, which will be released shortly, to get more detail on that. It is a pretty grim picture for its mortgage customers, who are stuck with it, however.

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