Cuts to mortgage rates as AIB caves in on variables
Banks will be left with no option but to cut extortionate variable mortgage rates after AIB buckled and said it was now likely to reduce its rates within two months.
The AIB change of tack follows a wave of anger on the issue, and will pile huge pressure on other lenders.
A cut of 0.25pc is now expected as early as June for the 140,000 variable-rate customers of AIB and its EBS and Haven brands.
AIB boss David Duffy told the Oireachtas Finance Committee the bank is set to reduce the interest on standard variable rates in the next "month or two".
He said it will do so if the bank's cost of funds, operating costs and assessment of risk continues to decline.
However, consumer advocate Brendan Burgess, who is chairing a mass meeting of people on variable rates in Dublin next month, said that a reduction of anything less than 1pc would be unacceptable.
He said a decrease of 0.25pc would save a family €500 a year on a €200,000 mortgage - but a 1pc decrease would save that family €2,000 a year.
The Irish Independent's Campaign for Mortgage Fairness has focused intense pressure on the main banks, the Government and the Central Bank to address the huge gap between the interest paid by customers with standard variable rates and those on tracker loans.
Across the banks, the average interest rate on a tracker is just over 1pc. This compares with 4.5pc on a standard variable rate.
Mr Burgess also said other banks would be forced to match any AIB rate cut, as switchers and new buyers will flock to it, putting competitive pressure on the other lenders.