Independent, doddl mortgages AIB cuts rates in response to new mortgage rival in market
15 Sep, 2020

AIB cuts rates in response to new mortgage rival in market

‘AIB said customers on its current variable rate of 2.75pc would save €41 on their monthly repayments if they switched to a green five-year fixed rate of 2.25pc.’

There has been an immediate response from an Irish bank to the entry of a new Spanish player to the mortgage market.

Spanish-owned Avant Money has shaken up the market with the first sub-2pc mortgages here for more than a decade.

It launched this week with the lowest rates in the market at 1.95pc.

This has prompted AIB to react by cutting its rates.

AIB’s new fixed-rate mortgages have rates as low as 2.25pc, as competition heats up in the home-loan market. There are reductions of up to 20 basis points.

Both Avant Money and AIB offer lower rates for those borrowing less relative to the value of the property. These loan-to-value (LTV) rates have become standard in the ­market.

Largely state-owned, AIB cut its rates earlier this year but has been forced to move again with the new level of competition that has emerged.

The bank has a new ‘green mortgage’ product, with five-year fixed rates of between 2.35pc and 2.25pc. This is down from 2.45pc at present. A green mortgage is for a home with a low building energy rating.

AIB said customers on its current variable rate of 2.75pc would save €41 on their monthly repayments if they switched to a green five-year fixed rate of 2.25pc.

The calculation is based on a 25-year mortgage with a remaining balance of €160,000, a property valued at €350,000 and an LTV of less than 50pc.

The lender said customers currently on a standard variable rate of 3.15pc would save €89 on their monthly repayments if they switched to AIB’s new three-year fixed rate of 2.45pc.

The calculation is based on a 25-year mortgage with a remaining balance of €250,000, a property valued at €350,000 and an LTV of between 50pc and 80pc.

Haven, AIB’s intermediary channel, is to give customers a cash payment of €5,000 when they draw down new mortgages of €300,000 or more on a fixed rate.

AIB chief executive Colin Hunt said: “AIB is committed to unlocking value for both new and existing customers. Our new LTV fixed-rate bands give customers the opportunity to reduce their mortgage repayments as their capital balances reduce.”

The cuts are seen as a response to Avant Money’s entry. The company, which has bases in Carrick-on-Shannon and Dublin, is backed by Spain’s Bankinter, a bank with €93bn in assets.

Avant Money is aiming to sign up first-time buyers and movers, but is also set to make a very strong play to get switchers on board.

Applications will be open to borrowers who meet Central Bank lending limits and Avant Money’s lending criteria.

The arrival of Avant Money will change the way that the mortgage market is structured, according to mortgage expert Martina Hennessy, managing director of Doddl.ie.

She said Avant Money would bring rate cuts, increased choice and long-term value to consumers.

“Avant Money will initially be offering a market beating 1.95pc three-, five- and ­seven-year fixed rate on less than 60pc loan to value, with a follow-on variable rate of 2.5pc,” said Ms Hennessy.

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