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The Great Bank Robbery...

Year of the great smash and grab raid -- by the banks...


IF THERE is one thing you can bank on, it is that 2010 will go down as the year of the great bank robbery.

Usually the raiders take money from the bank. But in the case of this bank job, the ones who have had their cash torn away from them in an audacious smash and grab raid are consumers.

Banking was once a byword for trust, but today's Irish bankers are a sorry lot. They now have their hands out, begging for a bail-out.

Unfortunately, we have no choice other than to stump up and fund their losses from lunatic loans that were advanced with abandon to developers and others during the boom.

We are set to learn today exactly how many billions of euro will be required to be pumped into the banks in order to bring them back to health.

But it is almost certain that the State will end up as the majority owner of AIB and Irish Nationwide, along with significant stakes in Bank of Ireland and EBS Building Society.

And these banks and building societies will return the compliment by hitting consumers with higher mortgage, credit-card and loan rates, along with a string of other hikes in banking charges.

AIB chose to get its bad news on mortgages out of the way yesterday in the hope that by today the news agenda will have moved on to the size of this latest bail-out.

It is hard not to be cynical about AIB's decision to hit existing mortgage holders with interest rises just hours ahead of the expected announcement of the nationalisation of the bank and its latest recapitalisation.

Existing customers will have to pay 0.5pc more for their mortgages, a move that will add €65 a month to repayments on a €250,000 mortgage.

AIB is also hiking its fixed rates from the start of business today. The bank had the lowest fixed- and variable-rate mortgages before the rises.

The bank has also told the European Commission that it will hike its mortgage rates again until they have gone up by a total of 1.5pc by the end of this year.

Yesterday's rises will hit AIB customers who have standard variable-rate mortgages.

A homeowner who borrowed more than 80pc of value of their home will see their interest rate rise from 2.65pc to 2.99pc, an increase of €80 a month or almost €1,000 a year in repayments on a €300,000 mortgage

The bank's best-value standard variable rate has gone up from 2.25pc to 2.75pc, which will increase monthly repayments by €25 on every €100,000 borrowed.

AIB's fixed rates, which were the most competitive in the market, are all rising. Its three-year rate goes from 3.19pc to 3.65pc, with effect from today.

THE changes will have no impact on those who have tracker mortgages or existing fixed-rate deals. But few, if any, customers of banks and building societies will escape some form of financial punishment.

Bank of Ireland has already announced rises in interest rates on credit cards, personal loans, overdrafts and student loans. AIB has said it is increasing its credit-card rates.

Expect all the others to follow suit with higher charges, interest rates and other charges as banks and building societies desperately scramble to get back to profitability.

And do not expect the Department of Finance to stand in the way of this bank charges hike frenzy.

Either the State continues to drip-feed the banks with more taxpayers' money to repair their blown-out balance sheets or the banks help themselves by pushing up interest and charges.

The situation is so bad that both of these unpalatable options have to be taken, as the Department of Finance sees it.

So get set for Bank of Ireland, EBS and Irish Nationwide to follow Permanent TSB and AIB by hiking their standard-variable mortgages and their fixed rates.

Both these types of home loans are likely to rise by at least 1pc before the end of the year.

Credit-card rates and the fees for the likes of a late payment will also continue to go up.

There will be fewer banks and building societies operating in this market.

From a situation where a typical Irish town had up to 11 banks, it now seems that more than half of these will be gone by the end of the year.

AIB, Bank of Ireland, Ulster Bank and the 'Third Force' of EBS, Irish Nationwide and Permanent TSB will now be the most likely banks left competing in the average town.

And savers, who are enjoying higher interest rates at the moment, are likely to see what they are earning on their nest eggs falling back.

All consumers can do is make sure they are getting the very best deposit rate they can at the moment, lock in to a decent fixed rate on their mortgage -- if their lender still offers one -- and keep on side with their credit union.

Because the bad news for consumers is that it will get worse before it gets better.


Report by Charlie Weston - Irish Independent.

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