Homeowners can expect the main banks to follow Permanent TSB’s lead and hike interest rates, pushing up the cost of mortgages for thousands struggling to meet monthly bills.
Chief executive of the Irish Banking Federation Pat Farrell said he has no doubt other lenders will find themselves in the same situation as Permanent TSB, which hiked rates by 0.5% last week.
“We have to get to a situation where banks can rebuild their balance sheets. That’s in everybody’s interests, including their customers,” he said.
He added banks are losing money on their mortgage books and this would create even bigger difficulties for the taxpayer.
“It is an unfortunate fact of life but it has to be faced up to,” he said.
Yesterday, Permanent TSB increased rates on standard variable rate mortgages by 0.5%. The move will mean an extra €57.29 per month on a €200,000 mortgage.
Homeowners on tracker mortgages are also facing the prospect of higher rates, with analysts saying the European Central Bank could hike rates towards the end of the year.