AIB slashes commission payouts to brokers for mortgages
ALLIED Irish Banks yesterday became the latest mortgage provider to slash commissions to brokers, as lenders continue to grapple with higher funding costs amid the credit crisis.
The bank said that, as of tomorrow, the commissions it pays will halve to 0.5pc. Whereas previously AIB clawed back some of the commission if the mortgage holder switched lenders within two years, the bank is now extending the period to three years.
AIB said the move is "due to the continuing high cost of funds in the financial markets and the resulting margin erosion in AIB's mortgage business."
Customer deposits accounted for 48pc of the group's funding requirements last year, with the rest coming from the wholesale market. The 'inter-bank' rate at which banks lend to each other is currently above 4.8pc, compared to just over 4.1pc a year ago.
Ulster Bank set the pace late last year by cutting commissions it pays brokers from 1pc to 0.5pc. It has since been followed by Irish Life & Permanent's Permanent TSB, First Active (also part of RBS), and Bank of Scotland (Ireland).
Ulster went one step further last week by announcing it will withdraw its mortgages from the broker market from the end of next month and sell them through its 131 branches in the Republic. First Active will continue to sell through brokers.
But while a number of lenders have unveiled hikes for new tracker mortgages, which move in tandem with the main European Central Bank rate, AIB decided earlier this week to leave its tracker rates unchanged.
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