Business Briefs

AIB AND BANK OF IRELAND REPORT RECORD RATES OF ACCOUNT OPENING

Switching to Permanent TSB from KBC and Ulster Bank also rises sharply as industry expects further pressures in months ahead.

A record number of new accounts were opened with AIB in the final week of May as customers of departing banks Ulster Bank and KBC Bank looked for alternative arrangements.

The bank said there was a 122 per cent increase in account openings in the week to May 29th as 11,000 customers opened current and deposit accounts with the bank, a record for AIB. That compared with last year’s average of 5,000 a week.

Account openings have increased by 61 per cent in the year to date, the bank said, with a total of 160,000 opened so far this year.

Bank of Ireland and Permanent TSB also reported a surge in account openings, with Bank of Ireland saying its current account applications had reached “unprecedented” volumes, increasing by almost 120 per cent in the week ending May 22nd compared with the same week in 2021. Permanent TSB reported a “sharp” 176 per cent increase in current and deposit account openings compared
with this time last year.

More than a million KBC and Ulster Bank current and deposit account holders will need to find new account providers within the next year, with 470,000 current accounts due to switch as the two banks leave the Republic.

KBC Bank Ireland is set to give customers up to six months to close their current accounts following the receipt of an account closure notification letter, which it will begin issuing this month. It originally set a timeline of 90 days. Ulster Bank began issuing closure notifications with a six-month notice period in April.

Which mortgage borrowers will be hit first by interest rate hikes hit.

The European Central Bank now looks almost certain to start increasing its official interest rates in July.

So how will this affect mortgage rates and which borrowers will be hit first in what is a fragmented market with a whole range of different products.

And are there options open to borrowers to protect themselves, at least to some extent.

The increase in interest rates on the money market will knock on to increases in rates on new fixed rate loans, by far the favoured product for new borrowers these days.

ICS and Avant have already announced some small increases in their fixed rate products – Avant increased its five-, seven- and 10-year rates last week though it left shorter term fixed rates untouched and surprisingly cut rates on fixed rate loans of 20 years plus.

The market average fixed rate has been static at around 2.6 per cent in recent months.

With the cost to banks raising money on the markets rising, a more generalised rise in the price of new fixed rate loan offers is likely over the coming months. In some areas of the market competition may slow the rate of increase, especially as mortgage rates here are already above elsewhere in the EU. But banks are likely to revise their fixed rate offers over the summer, with money market rates now heading relentlessly higher.

This will hit new borrowers and also those looking to refinance existing loans, including those coming off existing fixed rates.

The typical fixed rate is now 2.6 per cent and on current market forecasts it could go to above 3 per cent in the months ahead and perhaps be 3.2 per cent by the turn of the year.

That could increase repayments by around €90-€100 a month on new loans of around €250,000 compared to current rates.

FINANCIAL ADVISERS BELIEVE DEADLINE FOR AUTO-ENROLMENT PENSIONS PLAN WILL NOT BE MET

The Government scheme is for workers who do not have any private retirement income cover.

Financial advisers believe the Government will fail to meet its latest deadline to introduce an auto-enrolment pensions scheme for workers who do not have any private retirement income cover.

Less than two months after Minister for Social Protection Heather Humphreys announced that up to 750,000 people would be automatically signed up from January 2024 for a scheme that would see them contribute to a private pension, more than three-quarters of advisers in the industry have indicated the Government will not have enough time over the next 18 months to go live with the new regime.

And a quarter of them say the radical reform of Government pensions policy, designed to ensure every worker has reasonable financial resources in retirement might never happen at all.

«Despite the fact that last month the final design principles for the automatic enrolment retirement savings system for Ireland were announced, much of the industry appears unconvinced that auto-enrolment will be operational any time soon,» said Glenn Gaughran, head of business development at Independent Trustee Company (ITC), which conducted the survey.

In fact, almost one in every four financial advisers we asked said that it would be 2026 before it was available to workers – or perhaps never at all.

ITC interviewed 100 financial advisers for its survey.