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Banks told to cut ‘sky-high’ mortgage rates

The claim was made after the European Central Bank (ECB) again left its key lending rate at close to zero.

The decision to leave the rate at a record low was widely expected after the ECB cut it to a rock-bottom level in September.

ECB president Mario Draghi stated then that the rate had hit “the lower bound”.

The ECB then left its main refinancing rate at just 0.05pc.

This prompted calls for more banks to follow the lead of AIB and cut variable rates.

AIB last week sliced up to 0.25pc off its variable and loan-to-value rates.

But Bank of Ireland boss Richie Boucher told legislators this week he had no intention of playing “follow-the-leader” with AIB, and rejected accusations his bank was profiteering.

The Bank of Ireland variable rate is 4.5pc, almost double that charged by lenders in the rest of the eurozone. The average variable rate is close to 4.5pc, but some fixed rates are lower than this.

The Professional Insurance Brokers Association (PIBA) said variable rates here were “abnormally high”.

Rachel Doyle of PIBA said: “Lenders must be prevailed upon to reduce their out-of-the-norm interest rates, given that the ECB remains at 0.05pc.”

The only way variable rates would drop was if new lenders came into the market, she said.

But the plans by the Central Bank to restrict lending, based on higher deposits, would make this market less attractive, Ms Doyle added.

Fianna Fail finance spokesman Michael McGrath called on mortgage lenders to follow AIB and cut their variable rates.

He said the typical interest rate on a new mortgage here is up to 4.5pc, compared with a eurozone average of 2.56pc, which means a mortgage holder of €200,000 is paying almost €4,000 more interest a year than their eurozone counterparts.

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