Tracker mortgages 'put the banks into a perilous situation'
The cost of funding tracker mortgages is one of the reasons banks are charging higher interest on their variable rate mortgages.
Yesterday, Bank of Ireland and ICS Building Society announced they were increasing all variable mortgage interest rates by 0.5%.
Bank of Ireland said the increase is neccessary to return to profitability.
Tracker mortgage customers remain unaffected by the change.
Mike Soden, a former CEO of Bank of Ireland, said the banks have no choice, having made the costly mistake of providing tracker mortgages at the level they did.
Mr Soden said: "Now people would say 'Well it was too high'. It was an open market. People thought this was a great idea until four or five years later we are looking at the cost of these tracker mortgages, they have put the banks into a perilous situation.
"They are lending out money that is costing, like, you buy a product at a 100 and you sell it at 80 or 70 and that is fundamentally what the banks are faced with at this moment in time."
