Mortgage Increases Possible if Insolvency Bill is Passed

If the new personal insolvency rules come into force in Ireland  lenders could be forced to raise mortgage rates to compensate for their extra losses.

Bank of Ireland boss Richie Boucher said  he was looking at raising the interest rates on variable mortgages to compensate for this added “risk”.

He said the new insolvency laws, due later this year, could mark a fundamental change in the playing field for banks (  in Ireland )and make mortgage lending more risky. He said  “We price for risk,” he said, implying that the cost could be passed on to customers in the form of higher interest rates.

About a third of Bank of Ireland’s mortgage holders are on variable rates, and at a typical rate of between 3.4pc and 3.84pc are already paying almost double the interest of those with tracker mortgages.

The threat of higher interest rates comes a week after ratings agency Moody’s said up to a quarter of the mortgages in Irish banks were vulnerable to being written down under the new insolvency rules .