Banks 'locking in' mortgage customers to stop switching
Banks have been accused of trying to "lock in" mortgage customers to stop them from switching.
The accusation was made after Bank of Ireland cut its fixed mortgage rates by between 0.10pc and 0.35pc.
The bank said seven out of 10 of its new mortgage customers are now choosing a fixed rate - this is where the interest rate you pay on your mortgage is set for a defined period.
The rates are for new and existing customers.
The Richie Boucher-headed bank said that the move reflects the reduced cost of term debt to the bank.
Bank of Ireland has reduced its one, two, three and five-year fixed-rate products, including a new rate of 3.35pc for a two-year fixed period for loan to values of up to 80pc. Existing customers on variable rates, or coming to the end of their current fixed-rate period, can apply for the bank's new fixed rate options.
Mortgage expert Karl Deeter said the move shows the mortgage war is heating up.
"What's interesting is that every bank is terrified of losing their customer base," Mr Deeter said, "so they are all ensuring people lock in and are doing the 'deals' on fixed rates rather than variable rates."
He said Bank of Ireland was historically an expensive lender. "For Bank of Ireland to get competitive - at the same time as it is giving away money with the cash-back offer - shows how profitable lending is for them and how desperately they want to hold on to it."
KBC recently cut its mortgage variable rates for new customers, while AIB cut rates three times in the past 18 months.
Bank of Ireland resisted pressure from Finance Minister Michael Noonan to cut its variable rate, which is one of the highest in the market at 4.5pc. Instead, it has been reducing its fixed rates.
The latest reduction in fixed rates comes as data shows actions by the European Central Bank to reduce its main rate to encourage banks to lend are only marginally benefiting mortgage holders here.
The Fair Mortgage Rates Campaign, headed by consumer advocate Brendan Burgess, has called for a cap on variable rates.