ECB Cuts Key Rate to 0.75%, AIB Won't Cut

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ECB Cuts Main Rate to Record Low, Deposit Rate to Zero

http://www.bloomberg.com/news/2012-...te-to-record-low-of-0-75-deposit-to-zero.html

The European Central Bank cut interest rates to a record low and said it won’t pay anything on overnight deposits as the sovereign debt crisis threatens to drive the euro region into recession.

Policy makers meeting in Frankfurt today lowered the ECB’s main refinancing rate to 0.75 percent from 1 percent, as predicted by 49 of 64 economists in a Bloomberg News survey. The ECB also cut its deposit rate to zero from 0.25 percent and its marginal lending rate to 1.5 percent from 1.75 percent. President Mario Draghi holds a press conference at 2:30 p.m. in Frankfurt to explain the decision.
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AIB won't cut standard variable mortgage rates

http://www.rte.ie/news/2012/0705/aib-wont-cut-variable-mortgage-rates.html

''AIB’s standard variable mortgage rates will remain unchanged, while rates will remain under review at EBS,'' the bank said in a statement.

AIB said that as one of the country's ''pillar banks'', it has a fundamental role to play in the mortgage market here but said it must do so at a sustainable economic return.

It said that at current pricing levels, its mortgage portfolio - including its standard variable rate portfolio - remains loss making.
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To be fair to AIB, it's cost of funds is not reduced by the ECB rate reduction. While having sympathy for those on variable rates, we must also note that a rate reduction would be a net cost to the Bank. In effect it would be a government subsidy to variable rate mortgage holders.
 
Folks

I have deleted 5 posts where people "announced" their own personal tracker rate. This is totally irrelevant to anyone else and is just clutter in an important thread.

Brendan
 
Let me start of by saying I am not an AIB customer. It sickens me to my stomach when I read the statement from AIB immediately dismissing passing on the cut. Having worked in EBS recently(as a consultant) and speaking to some of the staff, the decisions being made by senior managers moving hundreds of employees around between AIB and EBS with no justification or reason, wasting money and time is incredible. Knowing how poorly the organisation is run and then reading that statement today makes my blood boil. I sincerely hope the Minister sticks his nose in here............
 
one of the newspapers had an article this week pointing out that you can borrow from AIB at the moment, put the money in a PTSB savings account and make a profit. These are 2 state-owned banks. That's not a sustainable situation.
 
shweeney said:
one of the newspapers had an article this week pointing out that you can borrow from AIB at the moment, put the money in a PTSB savings account and make a profit. These are 2 state-owned banks. That's not a sustainable situation.
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The fatal flaw in the argument being that you can borrow at mortgage rates and be given the money into your hand to put on deposit...
 
millieforbes said:
The fatal flaw in the argument being that you can borrow at mortgage rates and be given the money into your hand to put on deposit...
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The problem is that many people with mortgages are putting money on deposit instead of paying down their mortgage debt.

Any by problem I mean more in the wider sense for the economy. There are lots of benefits to the banks having lower levels of debt out there.
 
44brendan;[I said:
[/I]1272996]To be fair to AIB, it's cost of funds is not reduced by the ECB rate reduction.
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OK. So let's expect that they don't increase them for at least the next two rises.
 
ryaner said:
The problem is that many people with mortgages are putting money on deposit instead of paying down their mortgage debt.....There are lots of benefits to the banks having lower levels of debt out there.
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Yes, they are like you say. However, there are no incentives being offered by the banks to pay down mortgages - particularly tracker mortgages - so until such time as there are, I will continue to pay the minimum.
 
44brendan said:
To be fair to AIB, it's cost of funds is not reduced by the ECB rate reduction. While having sympathy for those on variable rates, we must also note that a rate reduction would be a net cost to the Bank. In effect it would be a government subsidy to variable rate mortgage holders.
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Please explain. Why do they increase rates then when the ECB do?
 
In a normal market it would reduce the rate at which AIB get money very quickly, but we are not in a normal market.
 
todays papers note that far from reducing the variable rate, AIB intends to bring it more in line with the other banks ie up at around 4%.... is this just the new CEO blustering or will he actually be allowed do it politically considering the goverment is in effect the actual owner of the bank?
 
Is it possible to get info on all the players in the Irish market what they will do about the cuts?

Maybe setup up a specific thread for easy reference after each move is announced by the ECB.

Anyone know what KBC will do?
 
Frank said:
Is it possible to get info on all the players in the Irish market what they will do about the cuts?

Maybe setup up a specific thread for easy reference after each move is announced by the ECB.

?
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I have compiled the rates in this Key Post

It would be useful to post the links to official announcements by replying to that Post.
 
Hate to defend AIB but the banks will never be profitable again if they dont absorb some of the rate cuts. If they arent profitable well end up paying anyway as the tax payer makes up the difference.
 
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