AIB 'must return to profitability'
Published 09/10/2012 | 18:22
Taoiseach Enda Kenny has insisted that the Government cannot intervene in mortgage rate increases - in the wake of Allied Irish Banks's (AIB) two interest rate hikes in two months.
Amid opposition claims that the Government is abandoning struggling homeowners, Mr Kenny said it is necessary for the bailed-out bank to return to profitability.
AIB announced its standard variable mortgage rate will increase by 0.5% to 4% from November 13.
Mr Kenny said: "This is a commercial decision by AIB. Yes it is difficult and challenging for people who are in variable mortgages, but it's necessary that the bank gets back to profitability."
Around 70,000 homeowners are expected to be hit with the rise which will see repayments on a 200,000 euro variable rate mortgage shoot up by 120 euro a month.
The Taoiseach said the Government has made it clear in the past that it cannot advise banks on the rates they set.
"The Government are not in a position here to direct that interest rates should not be passed on. We have made that point to the banks following decreases in interest rate levels by the European Central Bank on a number of occasions," he said.
AIB chief executive David Duffy said last week that while the bank is aware of the financial strain the increased rates will put on mortgage holders, the move is necessary to avoid further loss-making.
Fianna Fail leader Micheal Martin criticised the Government for failing to stand up for hard-pressed homeowners.
Mr Kenny did not attempt to intervene in the back-to-back interest rate hikes, despite criticism from the Central Bank and the International Monetary Fund, he said.