Bank of Ireland defies expectations with mortgage rate cuts

Francesca McDonagh, Bank of Ireland CEO

Charlie Weston Twitter Email

March 15 2022 11:44 AM

BANK of Ireland is cutting some of its mortgage rates, in a move that defies market expectations.

The cuts come after ICS Mortgages increased some of its key fixed rates earlier this week, citing higher costs of wholesale funding, prompting fears that other lenders were to follow with rate rises. The European Central Bank is expected to raise its key lending rate by the end of the year, while the Central Bank here found that mortgage rates increased by the most in five years in January.

Despite this, Bank of Ireland is reducing the rate on its green mortgage to 1.9pc, and it will make it easier to qualify for this product.

It is also reducing the rate on what it calls it high-value four-year mortgage by 10 percentage points to 2.20pc and allowing those borrowing €250,000 or more to qualify for this.

Previously, consumers had to borrow €300,000 or more to qualify for this loan.

Bank of Ireland launched the country’s first green mortgage in 2019. It is now reducing the rate on this by 10 percentage points to 1.9pc for new customers borrowing €250,000 or more.

It applies to those who are buying or building a home with a Building Energy Rating (BER) of B3 to A1.

The bank, run by Francesca McDonagh, is also cutting its four-year high-value mortgage fixed rate by 10 percentage points to 2.20pc

The eligibility threshold for all high-value mortgages (both green and non-green) goes from €300,000 to €250,000.

The changes will be available to new customers who meet the eligibility criteria from March 22.

Director of home buying at Bank of Ireland Alan Hartley said that since the launch of the green mortgage in 2019, the bank has supported around €1.9bn of these mortgages.

Green mortgages accounted for more than a third of its mortgage lending in 2021.

“Homes that are easier to heat and keep warm are good for your pocket and good for the environment. Encouraging customers to make these choices is one of the clearest ways that Bank of Ireland can support the transition to a low carbon future,” he said.

Across the market home-loan borrowing rates have been at their lowest for years in this country.

But the ICS Mortgages increases and higher wholesale interest rate costs have created an expectation mortgage rates here will rise.

The European Central Bank (ECB) is expected to increase its base rate by 0.25 percentage points from the end of the year, in a bid to try to control inflation.

Earlier this week ICS Mortgages, which is owned by Dilosk, blamed what it said were higher funding costs on international markets for immediately repricing fixed rates upwards.

This is because markets have already priced in expected ECB rate rises.

Its main refinancing rate has been at zero since March 16, 2016.

An ECB rate rise will make variable and tracker mortgages more expensive. It will also mean dearer new fixed rates.

About 200,000 homeowners are on standard variable rates and are set to pay more with rates. Around 250,000 are on trackers, which rise or fall when the ECB rate changes.

Borrowers have been increasingly seeking out fixed products as rates here are at their lowest level for 12 years and are likely to rise.