Bank passes on rate cuts slower than increases

beprint

An interesting article from the Irish Times.



Bank passes on rate cuts slower than increases

A reader from Dublin took out a tracker-rate mortgage with Permanent TSB in June 1996 and has noticed something about how the new interest rate is applied when the ECB base rate changes. She thought she would pass this information on.

“Basically, when the ECB rate goes up, the bank passes on the rate change very quickly; generally between zero and seven days. However, when the ECB rate goes down, the bank takes much longer to pass on the change; between 23 and 30 days.

“It usually writes to us about a month after the rate change, so it may appear to be the same time delay each time, but when I have examined the date from which the new rate is charged it tells a different story.”

She has looked into it “and it would appear that they are not breaking the law. The terms and conditions of the tracker mortgage state that they must pass on the rate change within 30 days.

“So, they are covered. But it does seem to be quite a cynical way of doing business – to pass on the pain quickly but delay passing on the savings to customers. How much are they making per year from this practice? Are all the banks doing this?”

She says the requirement to pass on the rate change within 30 days is open to interpretation “and, in my view, abuse. Surely a fairer way of doing this would be to pass on both rate increases and decreases within the same length of time? Is this a hangover from the bad old days of the Celtic Tiger?”

Kennie1

Didn't think that the Irish Permanant (as it was known back then) sold trackers mortgages back in 1996.

I have noticed this over the years since we changed to a tracker mortgage in 2003 though. You would think that the CBI should regulate the banks poor bahavior like this.