Bank of Ireland and PTSB ‘to match AIB’s mortgage rate hike within days’, say experts

Bank of Ireland, College Green, Dublin

Charlie Weston

AIB has set the ball rolling on what is expected to be a string of mortgage rate rises from the main banks.

Rivals Bank of Ireland and Permanent TSB could hike their rates as soon as next week, experts said.

Fixed rates at AIB and its subsidiaries EBS and Haven are going up by 0.5 percentage points with immediate effect, in a move that is set to make it €300 a year more expensive for new borrowers and switchers. But in a surprise move, it did not increase its variable rates.

Bank of Ireland and Permanent TSB are now expected to increase their fixed rates and could also hike variables, in reaction to aggressive rate-rising moves by the European Central Bank (ECB).

The ECB has already pushed up its main refinancing rate by 1.25 percentage points, with the same again expected before the end of the year. However, the fact AIB, Haven and EBS fixed rates are only going up by 0.5 percentage points puts pressure on Bank of Ireland and Permanent TSB to limit their rate rises.

Non-bank lenders Avant Money, ICS Mortgages and Finance Ireland have already increased their rates this year, some doing so a number of times. Rates on mortgages sold to vulture funds have also gone up.

Mortgage broker Michael Dowling said Permanent TSB and Bank of Ireland will now be under continuing pressure to hold off on any variable-rate rises after AIB failed to increase its variables.

And the two banks have more expensive variables than AIB.

However, both Bank of Ireland and Permanent TSB are expected to push up their fixed rates as soon as next week.

Mr Dowling said: “Bank of Ireland and Permanent TSB can absorb the ECB move on their variable rates for another couple of weeks, because they have some of the dearest variables in the market anyway.”

He said the fact that AIB Group only increased its fixed rates by 0.5 percentage points means the two banks will likely announce similar fixed rate rises next week.

The higher AIB, Haven and EBS fixed rates will add €25 to the monthly costs on every €100,000 borrowed. This only applies to new fixed rates and not those on existing fixes.

The new higher rates for those with loan approval, who are about to draw down a mortgage to buy a home, and switchers, will not apply until November 14.

This will give these people in the process of securing a mortgage four weeks to get to the drawdown stage before the new rates kick in.

This is in contrast to Finance Ireland which announced higher lending rates with immediate effect to all those who had not submitted a drawdown request prior to the rate-rise announcement.

AIB said the rises are in response to the European Central Bank’s decisions to raise interest rates by 1.25 percentage points since July.

It said: “These changes will not affect any of the bank’s variable or tracker mortgage rates, while existing fixed mortgage rates are also not affected.

“More than half of our mortgage customers are already on a fixed-rate mortgage.”

AIB has until now only passed on interest rate increases to tracker mortgage customers as the bank is contractually obliged to do.

AIB said the monthly repayment on a new €100,000 AIB five-year green fixed rate mortgage with a loan to value of 50pc to 80pc, over a 25-year term, will be €455.91. The previous monthly repayment would have been €431.

Both Bank of Ireland and Permanent TSB said they were keeping rates under review.

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