AIB reduces its fixed rates

Brendan Burgess

Brendan Burgess

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From Charlie Weston

Bank shakes up mortgage market with fixed-rate cut

I attach the press release...

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Am I missing something?

These do not shake up the market? ( The article doesn't say so, but Charlie wouldn't have written the headline.)

Best Buys for LTVs <90%

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While its nominal rate is cheapest for 10 years fixed, with BoI giving 3% cash back, you should go with Bank of Ireland.
 
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Brendan Burgess said:
Mortgage broker Karl Deeter said AIB would have the cheapest seven and 10-year rates. Haven will have the same fixed rates for one to five years, but no seven or 10-year offerings.
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KBC are still offer 3.05% for 10 years fixed. 2.95% with the current account discount.

[edit] That's with an LTV <50%
 
Yet again, these rates show how dysfunctional the Irish mortgage market is.

A borrower with 50% LTV is paying the same fixed rate as someone with 90% LTV. And yet they tell us all the time why Irish mortgage rates must be much higher than the rest of the eurozone because of the increased capital required and the increased risk.

And in a market where the underlying cost of funds is expected to increase, 5 year fixed is cheaper than a 1 year fixed.

In the old days, when interest rates were expected to increase, the longer the fix, the higher the rate.
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I think the big banks (BoI+AIB) get away with their rates not being competitive simply because they're so big. Too many people still think they can only get a mortgage from the bank they have a current account with .
 
Brendan Burgess said:
And in a market where the underlying cost of funds is expected to increase, 5 year fixed is cheaper than a 1 year fixed.
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Their 1 year fixed exactly matches their SVR. So no discount for long term customers on SVR or those on higher LTV rates, unless they commit to long term fixed rates.

56% of AIBs existing mortgage book is at 3.15%. Changing that rate has a material impact on their profit. [Edit: 56% refers to all variable rates, not just SVR]

Similar to other lenders, it's time for people to fix (or switch).
 
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@Brendan Burgess
Sorry, I misinterpreted the data. From AIB annual results.

AIB Group mortgage split is:
Tracker 30%
Fixed 14%
Variable 56% (includes LTV rates).

I can't find a split for AIB specifically, but I seem to recall it was asked at one of the finance committee meetings.
 
Is this an attempt to head off switchers at the pass (they can still move but it might be perceived as more awkward) or possibly to hoover up more of the new mortgages being written (as it appears that FTBers are heading more towards fixed than variable)?

Would it be fair to say that in the past movements in the fixed rate would have been a harbinger of where banks saw central bank rates going but now it looks like more market driven?
 
shades25 said:
Would it be fair to say that in the past movements in the fixed rate would have been a harbinger of where banks saw central bank rates going but now it looks like more market driven?
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Absolutely. Competition is dictating the pricing of short term fixed rates.
The difference in 5 Vs 10 year rates is based on cost of funds for those periods.

shades25 said:
possibly to hoover up more of the new mortgages being written (as it appears that FTBers are heading more towards fixed than variable)?
Click to expand...
I'm not sure if it will work. FTBs are going for the cash back which requires fixing or paying high rates, or lower fixed rates on offer at UB. AIB aren't competing with UBs 2.3% rate, and no cashback on offer (their subsidiary EBS looks after that).
But it might be enough to stop people switching away.
 
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Good news for me I suppose. I'm with Haven and thinking of fixing for 5 years coming from a SVR of 2.95%. Very modest saving of about €12 per month. Any reasons why I shouldn't fix?
 
RedOnion said:
EBS are already cheaper for 1 & 2 year, and offer cashback for new lending. So while cashback is in place, I can't see them going any lower, unless to match BOI rates over shorter terms.
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Thanks RedOnion. I saw Haven are going to reduce their rates.
 
Is there a breakdown of the fixed rates offered by AIB across the LTV ratios or are they the same across the board?
 
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