Bank of Scotland Ireland (BOSI) has raised the rate it charges on existing standard variable mortgage customers by 0.9%, it has emerged, in a sign that the bank is trying to reclaim eroding profit margins.
The lender, which is owned by UK bank Lloyds, announced nearly two weeks ago that it was increasing its prices for new mortgage business by 0.9%, but a BOSI spokesman confirmed the bank had also put up rates on those existing customers who did not have either a tracker mortgage or a "price promise". He declined to say how many customers were affected, but said the number was "small".
A large proportion of BOSI's mortgage customers are on trackers, a product the bank pioneered in the Irish market, which has put severe pressure on profit margins as the ECB has radically reduced the base rate since October. At the same time, the bank has been offering some of the most competitive deposit rates in the market, meaning it is often paying out more than it is collecting. By putting up rates on unprotected borrowers, it can recoup some of the hit it is taking on its less flexible loans.
Brokers and bank analysts have recently begun advocating higher margins to reflect the reality of the rate environment and get banks back to profitability.
Davy Stockbrokers said last Friday it expects to see "margin expansion" over the next year and a half.