| -2.6°C Dublin

Bank of Ireland to increase its mortgage rates


Interim chief executive of Bank of Ireland Gavin Kelly. Photo: Frank McGrath

Interim chief executive of Bank of Ireland Gavin Kelly. Photo: Frank McGrath

Interim chief executive of Bank of Ireland Gavin Kelly. Photo: Frank McGrath

BANK of Ireland is to increase the interest on its fixed-rate mortgages for new customers.

Rates on fixeds are to rise by 0.25 percentage points.

This is half of the size of the increase in fixed rates announced by its rival AIB.

The Bank of Ireland new rates will be effective immediately for new borrowers and switchers.

It means that the bank’s stand-out rate of 1.9pc for those borrowing more than €400,000, with no cash back, will go from 1.9pc to 2.15pc for new borrowers and switchers.

But the new rates will not impact existing BoI customers who are coming to the end of a fixed rate.- They will still be able to lock in at the rates that have been in place before the latest hike.

There is no increase in variable rates.

Trackers customers automatically face higher interest in line with the three record rises announced by the European Central Bank (ECB) in the last four months.

The BoI move comes after AIB pushed up its fixed rates by 0.5pc in the last few weeks.

Bank of Ireland will allow those who have already have approval for a new mortgage to get the rates that have been in place up to now, provided they draw down by December 9.

This move to give those in the process of getting a new mortgage, or switching to it, four weeks’ notice is in line with what AIB did.

It comes after Finance Ireland was heavily criticised for initially announcing a rate rise that impacted those in the process of drawing down a mortgage.

Bank of Ireland customers on existing fixed rates will not be impacted by the new announcement.

And customers of KBC Bank Ireland, whose mortgages are moving to Bank of Ireland, will continue to retain the existing terms of their mortgages.

Business Newsletter

Read the leading stories from the world of business.

This field is required

Financial experts have been surprised at the restraint shown by the three retail lenders, AIB, Bank of Ireland and Permanent TSB, in not announcing higher and more widespread rate rises.

This is especially as the three ECB rises have taken its main refinancing rate from 0pc to 2pc since the summer.

Non-bank lender ICS has announced multiple rate rises and heavily restricted its new lending.

Finance Ireland has announced big increases in its rates and suspended its long-term rates of 10 years or more just a year after introducing them.

Avant Money has also upped its rates.

However, the three main banks have been far more restrained as they are gaining hugely from having massive amounts of household and company savings on their books.

The ECB is now paying 1.5pc for bank funds deposited with it, prompting calculations that the three banks are set to make a €1bn killing on deposit and lending spreads as the ECB cranks up interest rate increases.

The pressure will now be on Permanent TSB to also hold back on pushing up its variable rates, and keep any increase in new fixed rates to a minimum.

It comes as figures out this week show that mortgage rates in this market have fallen to their lowest level in years.

This has prompted warnings to people on expensive variables to grab their last opportunity to get a cheaper fixed rate.

Home-loan rates in this country are now the eighth lowest in the Eurozone, having been the highest just a few months ago.

This is in contrast to the rest of the Eurozone where rates have risen dramatically over the past six months.

The Central Bank of Ireland figures show that the average new mortgage rate in this country was 2.58pc in September. This is down from 2.64pc in August.

The Eurozone average is 2.40pc, its highest level since at least August 2017, and over double the rate this time last year.

Ireland was also the only country to see its average rate fall in September compared to the previous month.

Most Watched