AIB variable rate cut puts pressure on rivals
THE move by the AIB group to cut its variable rates for the third time in less than a year is set to pile pressure on other lenders to reduce interest charges for homeowners.
AIB, EBS and its broker-focused division Haven will cut variable rates by 0.25pc from October for new and existing customers.
Some 156,000 mortgage holders will benefit form the cut - around half of the total number of homeowners on variable rates across all banks.
Experts said other lenders could now cut rates, especially as Finance Minister Michael Noonan has threatened moves against banks in the Budget if they fail to drop rates. Mr Noonan welcomed the AIB's decision.
Banks have resisted attempts to force them to reduce variable rates, with most opting to decrease fixed rates instead.
The surprise AIB announcement came after the bank reported making a profit of €1.2bn for the six months up to June.
Financial expert Karl Deeter said he expects other lenders to now react.
"This puts more pressure on the other lenders. To get people in the door to take out mortgages, they will have to cut or they will lose market share," he said.
Mr Deeter, of Irish Mortgage Brokers, said people should consider switching to AIB or EBS if they have positive equity built up in their homes.
AIB said a homeowner on a €200,000 mortgage over 25 years will save €325 a year from the decrease. The monthly savings work out at around €27.
Over a year, the three reductions in the variable rate since last October will have saved this customer close to €1,000 in repayments a year, AIB said.