It’s a welcome, if surprise move, following the recent bad news for banking customers in Ireland. AIB’s ‘green’ five-year fixed mortgage rates will now start from as low as 2.10%.
It hasn’t been a great few months for banking customers in Ireland.
A few months ago AIB and BOI both increased their current account fees and then this month Ulster Bank announced the shock decision that it was exiting the Republic of Ireland after over 160 years here. Meanwhile An Post announced that it will end its current account cashback rewards scheme.
To top it all off, BOI has just announced that it's to close over 100 branches by the end of the year.
So it’s good that there's finally some positive news to talk about on the banking front with AIB today reducing some of its mortgage rates while also introducing a new green personal loan.
What’s changing?
AIB is cutting the rates on its 'green' five-year fixed mortgage by up to 0.20%.
The rates will now start from as low as 2.10% and are open to both new and existing customers of AIB.
According to AIB, existing customers on its standard variable rate of 3.15% could save around €130 on their monthly repayments, or €1,560 a year, if they moved to its new rate of 2.25% for example*.
However to qualify for the new rates you must live in a property that has a building energy rating (BER) between A1 and B3. In other words an energy-efficient home - hence the title of ‘green’ mortgage.
Also, as you can see from the table below, to get the lowest rate of 2.10% a first-time buyer would need a deposit of 50%, while a switcher or an existing AIB mortgage customer would need this much equity in their home, which is easier said than done.
*The calculation is based on a 25-year mortgage with a remaining balance of €285,000 and at least 20% equity.
|
Product |
Loan-to-value (LTV) |
Old rate |
New rate |
Reduction |
|
5-year fixed |
<=50% |
2.25% |
2.10% |
- 0.15% |
|
5-year fixed |
>50%<=80% |
2.35% |
2.15% |
- 0.20% |
|
5-year fixed |
> 80% |
2.45% |
2.25% |
- 0.20% |
I’m an existing customer of AIB - can I avail of these rates?
Yes. As mentioned above you can apply for this rate if you’re an existing customer and your house or apartment has a BER of at least B3.
However if you’re already on a fixed rate with AIB and want to avail of the new green rates an early repayment charge may apply.
New green personal loan rate
AIB has also introduced a new green personal loan with a rate of just 6.25% (6.40% APR), which undercuts its current standard rate of 8.95% for personal loans by a wide margin.
The rate is available to customers who are making green renovations to their home to make it more energy efficient or who are buying an electric or hybrid vehicle.
Customers can take out a green personal loan for up to five years for amounts from €3,000 to €30,000.
However you must be an AIB customer and apply through its mobile app.
If you're not an AIB customer then you should check out An Post. You can borrow from €5,000 to €75,000 for up to 10 years from 4.9% APR if you’re getting your home upgraded and using an SEAI energy efficiency grant.
If you’re looking for a personal loan, you can compare interest rates and monthly repayments here.
Thoughts
Any downward movement in mortgage rates has to be welcomed, particularly as we still have the second highest rates in the eurozone and have done for years.
But while the rate of 2.10% is certainly eye catching and is close to the lowest available in the market right now, it's going to be out of the reach of the vast majority of first-time buyers.
Many buyers struggle to get the 10% deposit needed for a home, let alone the 50% required for this rate. What’s more, the majority of homes for sale in Ireland don’t have a BER of B3 or higher - and those that do tend to be newer homes that are out of the budget of many buyers.
Switchers might also struggle for the same reasons, with many buyers who bought at the peak of the boom still struggling with low or even negative equity.
Indeed, AIB itself says only 14% of customers chose its green rate in 2020.
AIB's standard three-year fixed rate of 2.55% for those with a deposit of between 10% and 20% will be more achievable, which is still competitive, but not quite as headline grabbing.
Always compare
Are you looking for the right mortgage? Remember to always shop around.
You can use our mortgage calculator to easily and quickly compare interest rates, offers and cashback incentives from all of Ireland’s mortgage lenders.
When it’s time to apply for your mortgage, you can submit an online enquiry through our new mortgage broker service and one of our experienced financial advisors will call you back to get your application started.
Our mortgage broker service is entirely free and is fully digital from start to finish, meaning everything can be carried out online from the comfort of your home. And it's completely paper-free too!
To find out more about our mortgage broker service, see here and to learn about how your mortgage application will be assessed, take a look at this guide.
If you’re looking for more information on mortgages, check out the following articles that may help:
- Here are 6 tips that will help make it easier for you to get your mortgage deposit together.
- We’ve outlined 9 common mistakes people make when applying for a mortgage that everyone should be aware of.
- More people are opting for fixed rates over variable rates, however it’s important to know the pros and cons of both so that you can make an informed decision.
Let's hear from you
Are you happy about AIB’s recent announcements? Is a ‘green’ mortgage something that you’d consider? We’d love to know! Comment below or reach out to us on Facebook, Twitter or Instagram.
