AIB is to cut its standard variable rate by 0.25%, in a move which will see thousands of customers save thousands of euro over the lifetime of their loans.
Interest rates have been at a rock-bottom low for some time, with many of Ireland's mortgage holders wondering why their repayment rates haven't been cut.
Well, the news that many homeowners have been waiting for arrived this morning - for AIB customers.
Standard variable rate cut
On November 1st, AIB will cut its standard variable rate by 0.25% for new and existing customers.
The cut will take the bank’s main mortgage rate down to 3.15% and save an estimated 100,000 mortgage holders thousands of euro on their repayments.
So, what does that cut actually mean in terms of savings?
Well, let’s say you have €200,000 left to pay on your mortgage over the next 25 years. At AIB’s existing standard variable rate, you would pay around €990 every month. But at the new reduced rate of 3.15%, you would pay €26 less - €964.
That’s a saving of €312 a year, or €7,800 over the lifetime of your loan.
Fixed rate cuts
In addition to its standard variable rate cut, AIB has also announced a range of fixed-rate cuts and a brand new 7-year fixed rate.
Most significantly, the bank’s 5-year fixed rate will fall by 0.5% to 3.30% on September 18th, which will make it the lowest rate of its kind on the market.
AIB’s 7-year fixed rate will enter the market at a competitive 3.50%, which is likely to appeal to new mortgage customers looking for medium-term certainty for the repayment rates.
All of AIB’s rate changes are listed below.
|
Product |
Current rate |
New rate |
|
1-year fixed |
3.50% |
3.20% |
|
2-year fixed |
3.60% |
3.20% |
|
3-year fixed |
3.65% |
3.20% |
|
4-year fixed |
3.75% |
3.30% |
|
5-year fixed |
3.80% |
3.30% |
|
7-year fixed |
n/a |
3.50% |
|
Standard variable rate |
3.40% |
3.15% |
|
LTV <50% |
3.10% |
2.75% |
|
LTV 50%<80% |
3.30% |
2.95% |
|
LTV>80% |
3.50% |
3.15% |
How will other banks react?
When AIB last cut its standard variable rate in May 2016, the move sparked a flurry of activity across the Irish mortgage market, with KBC announcing fresh cuts of its own in reaction.
So far in 2017, the dominant trend from the banks has been to cut fixed rates, which have been increasing in popularity in recent years.
Bank of Ireland, KBC, Permanent TSB and Ulster Bank all cut fixed rates over the last few months, but AIB is the first bank to cut its standard variable rate in over a year.
It will be interesting to see how other banks will react to the move, as Ireland’s mortgage market continues to become more and more competitive.
