One of the arguments for increasing mortgage rates is also blamed for banks having to pay up for retail deposits as its so competitive. If a bank is charging less on lending and paying more on deposits, there is no doubt this is unsustainable. Banks have to make profit to stay in business, if they are not making any profit off deposit business (which I doubt many if any are) and in fact making a loss on retail deposit business, they will look to subsidise this elsewhere- in the form of higher mortgage rates???
In my personal view I cant see large margins remaining on deposit rates for the forseeable future... if you take Anglo and INBS out of the mix (1 insitution nationalised and another on borrowed time with no future), deposit rates would be be as competitive and for the likes of EBS, Bank of Ireland and PTSB, they are only offering their rates because they have to remain competitive against Anglo and INBS. They will most likely begin to see credit become cheaper on the wholesale markets and wont be as reliant on retail funding as they have been in the last 2 years.
Just my view!