Bank of Ireland ‘deliberately keeping floating rates high’

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The Bank of Ireland refused to rule out selling distressed loans to vulture funds, its chief executive Richie Boucher saying the bank was deliberately keeping variable rates high to encourage customers to switch to fixed-rate mortgages.

Mr Boucher also said it was ‘inevitable’ that more homes would be repossessed in the coming years.

Appearing before a committee of the Oireachtas on Thursday, Mr. Boucher admitted that the bank’s variable rates were high. He said this was a result of the bank’s policy of encouraging users to switch to other products.

“We are deliberately urging customers to switch to fixed rate as we believe the current rate environment is abnormal,” he told Fianna Fáil finance spokesman Michael McGrath.

Mr Boucher said the bank’s “carefully considered strategy” was aimed at providing certainty for both Bank of Ireland and its customers. He said it was inevitable that loan rates would rise in the future.

“If someone takes out a 20-year mortgage and they don’t think the rates are going to go up, I would ask them if they should make that investment. It is an unrealistic proposition,” he said.

“Each of our existing customers could save money if they’re variable rate by switching to fixed rates. Obviously it binds them, but it can save them money and give them certainty.

‘Last resort’

“I cannot give an absolute guarantee but our policy is to settle disputed loans ourselves,” he said, adding that repossession was “a last resort.”

“Repossession costs us money, is not good for our reputation and is something we try to avoid.”

However, he admitted that the bank would take over more homes in the coming years.

“The level of foreclosures is likely to increase, there is an unfortunate inevitability about this,” he said.

Speaking of an increase in mortgage approvals, Boucher said he believed just under half of all home purchases were still being made in cash. He said supply was still a big problem as some developers had been spooked by the introduction of tougher lending rules by the Central Bank early last year.

On Brexit, Boucher said the bank had yet to see any impact from Britain’s vote to leave the European Union.

“We were surprised at the lack of real impact to date on Brexit. We thought it could happen, so we spent a lot of time with customers in border counties and those working in the hospitality and hospitality sectors. retail on how they might be affected by currency fluctuations,” he said.

“The impact has been surprisingly mild so far, although I think there will be a negative impact on our economy.”

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