AIB offers a <50% borrower a rate of 2.5%

G

Gordon Gekko

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My friend was offered 2.5% variable by AIB, provided his LTV is 50% or less.

The rate for LTV of <50% according to their website is 2.75%.

Clearly, there are bespoke deals being done for people.

That’s not through Private Banking or anything quirky.
 
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Gordon Gekko said:
My friend was offered 2.5% variable by AIB, provided his LTV is 50% or less.

Clearly, there are bespoke deals being done for people.

That’s not through Private Banking or anything quirky.
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Any more details on that deal? Currently in discussion on switching to AIB on variable rate.
 
That's interesting Gordon.

Was it a relatively large loan, with a low DTI?

I'm surprised that banks don't compete more aggressively for low risk/high value business.

Particularly AIB - they must be haemorrhaging market share at this level.
 
Sarenco said:
That's interesting Gordon.

Was it a relatively large loan, with a low DTI?

I'm surprised that banks don't compete more aggressively for low risk/high value business.

Particularly AIB - they must be haemorrhaging market share at this level.
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No, it’s not that big a loan...circa €400k.

I agree...a forward thinking bank might even come up with a matrix whereby a €600k loan for someone on €200k a year is priced at X, whereas a €400k loan for someone on €100k a year is priced at Y and so on.

I am hearing more anecdotal stuff around people getting bespoke deals.
 
Thanks Gordon.

Very interesting to hear that banks are doing bespoke deals but I can't agree that €400k isn't a big mortgage, at least from a lender's perspective - bear in mind that the average price of a three-bed semi nationwide is only around €230k.

One thing is for sure - some banks are very slow to adjust their pricing, even when it is glaringly obvious that they should do so to avoid losing valuable business.
 
Gordon Gekko said:
My friend was offered 2.5% variable by AIB, provided his LTV is 50% or less.

Clearly, there are bespoke deals being done for people.

That’s not through Private Banking or anything quirky.
Click to expand...

How can he/she be sure they will keep it at this level? Surely if its a variable rate then they can shove it back up whenever they want?
 
JohnJay said:
How can he/she be sure they will keep it at this level? Surely if its a variable rate then they can shove it back up whenever they want?
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Presumably he’ll confirm that it’s tied to AIB’s 2.75% variable rate?

i.e. his contract/agreement will say that he’s on whatever that 2.75% rate is called minus 0.25%
 
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Gordon Gekko said:
Presumably he’ll confirm that it’s tied to AIB’s 2.75% variable rate?
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Hi Gordon

I wouldn't presume that. It's a very good question raised by JJ. Banks have been known in the past to attract mortgages with a low rate e.g. KBC and then not pass on rate cuts. Likewise, they offered special deals to depositors and then those deposit rates dropped down quietly.

I don't think that AIB is planning to amend its mortgage offer for your friend. So he should insist on it. The wording should be along the lines of "The rate will be a 0.25% discount on the mortgage rate on offer to customers with an LTV of <50%"

Brendan
 
Hi Gordon

Was he a switcher?

Was he buying a new house?

Was he an existing AIB customer threatening to switch?

Existing AIB customers should be asking for that rate.

Brendan
 
Brendan Burgess said:
I don't think that AIB is planning to amend its mortgage offer for your friend. So he should insist on it. The wording should be along the lines of "The rate will be a 0.25% discount on the mortgage rate on offer to customers with an LTV of <50%"
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There is of course a possibility that AIB are going through the process of reducing rates, and know 2.5% is the rate they'll be offering by the time the mortgage is drawn down.

The effective rate of BoI with cash back at 2.33%, or UB fixed at 2.6%, would point to a need to reduce their headline rate to this level to be competitive. There's no point having the lowest variable rate if it's higher than other banks fixed rates.
 
RedOnion said:
There's no point having the lowest variable rate if it's higher than other banks fixed rates.
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Exactly.

I know I've been banging this drum for some time but I'm still very surprised at how long AIB are taking to react to this reality. It's over six months since AIB last changed their rates and meanwhile they have been losing significant market share to their competitors.

AIB earns a significantly higher net interest margin than BOI so there is ample room for it to take a more assertive position.
 
Sarenco said:
AIB earns a significantly higher net interest margin than BOI
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Is this on their overall book or on their mortgage book? Have you the figures for this?

It would surprise me if it is the case for the mortgage book. A good proportion of BoI's customers are on 4.5% SVR.

Brendan
 
Hi Sarenco

I imagine that their margins on their mortgage book is much lower as they pass on rate cuts to all customers whereas BoI has so many on 4.5%.

I am not sure where the Indo gets the information on market share or how reliable it is. ptsb's market share fell close to zero a few years ago, so they have since eaten into everyone else's share since then. BoI was also concerned about its loss of market share.

Brendan
 
Market share data is compiled by BPFI, and fairly robust. It's reported by the banks to the market with their annual results.
 
Brendan Burgess said:
BoI was also concerned about its loss of market share.
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I doubt that's still the case Brendan - BOI grew their market share in each quarter of 2017, from 26% in Q1 to 29% in Q4.

The bottom line is that AIB's rates are no longer competitive.
 
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