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BoI hike variable rate, cut free banking

Monday, September 24 15:52:06

Bank of Ireland and ICS Building Society have confirmed an increase of 0.5pc a year across all variable mortgage rates and have cut their free banking offer.

On average the increase will add an extra E27 a month to a mortgage of E100,000 over 25 years.

The change will come into effect for existing customers on 24 October. It came into effect for new business from 31 August.

A spokesperson for the bank, which is part owned by the Government, said it does not automatically issue news releases to the media on issues like this, or where there is a change that does not affect the majority of its customers.

In a statement, it said the decision was regrettable but necessary, due to the continuing high cost of funding and deposits and the need to return the bank to profitability.

Meanwhile, the bank has also announced new plans that will see free banking only available to customers who leave E3,000 permanently in their current account, from the 19th November.

This money will not earn any interest.

The National Consumer Agency (NCA) has criticised the plan, saying that the changes will see customers, who previously met the conditions for free banking, now subject to transaction charges.

"The NCA is urging Bank of Ireland's customers who met the previous criteria for free banking to use the next few weeks to review their statements, assess the charges they will be subject to, think about how they use their account and consider switching accounts, if they can make savings. The Central Bank's Current Account Switching Code is designed to make switching easier and quicker for consumers.

The NCA's Director of Public Awareness and Financial Education, Karen O'Leary, commented, "Bank of Ireland's new charges are a lose-lose situation, which will act as a deterrent to smart banking by encouraging people to use more cash and less electronic payment methods like debit cards. This is a backwards step at a time when we are being encouraged to be less reliant on cash and follows similar changes by AIB to their free banking criteria in May of this year."