AIB has got the ball rolling in what is expected to be a series of mortgage rate hikes from the main banks.
ivals Bank of Ireland and Permanent TSB could raise interest rates as early as next week, experts said.
The fixed interest rates at AIB and its subsidiaries EBS and Haven will be increased by 0.5 percentage points with immediate effect, making it 300 euros more expensive for new borrowers and those switching banks. But surprisingly, it didn’t increase its variable interest rates.
The Bank of Ireland and Permanent TSB are now expected to raise fixed rates and could also raise variables in response to the European Central Bank’s (ECB) aggressive rate hikes.
The ECB has already raised its main refinancing rate by 1.25 percentage points, which is expected before the end of the year. However, the fact that AIB, Haven and EBS fixed rates are only increasing by 0.5pp is putting pressure on the Bank of Ireland and Permanent TSB to limit rate hikes.
Non-bank lenders Avant Money, ICS Mortgages and Finance Ireland have already hiked rates this year, some multiple times. Interest rates on mortgages sold to vulture funds have also risen.
Mortgage broker Michael Dowling said Permanent TSB and the Bank of Ireland will now face continued pressure to hold back increases in variable rates after AIB failed to increase its variable rates.
And the two banks have more expensive variables than AIB.
However, both the Bank of Ireland and Permanent TSB are expected to hike their fixed interest rates as early as next week.
Mr Dowling said: “The Bank of Ireland and Permanent TSB can absorb the ECB move in their variable rates for a few more weeks because they have some of the most expensive variables on the market anyway.”
He said the fact that AIB Group increased its fixed rates by just 0.5 percentage point means the two banks are likely to announce similar fixed rate hikes next week.
The higher AIB, Haven and EBS fixed interest rates increase the monthly costs by €25 per €100,000 loan. This only applies to new fixed prices and not to existing fixed prices.
The new higher rates for those with credit approval who are about to take out a mortgage to buy a home and for those who are making the move will not take effect until November 14.
This gives those people securing a mortgage four weeks to reach the drawdown phase before the new rates take effect.
This is in contrast to Finance Ireland, which announced higher lending rates effective immediately for those who had not applied for borrowing prior to the rate hike announcement.
AIB said the hikes were in response to decisions by the European Central Bank to raise interest rates by 1.25 percentage points since July.
It said: “These changes will not affect the bank’s variable or tracker mortgage rates, while existing fixed mortgage rates will also be unaffected.
“More than half of our mortgage customers already have a fixed-rate mortgage.”
AIB has only passed interest rate increases to tracker mortgage customers, which the bank is contractually obligated to do.
AIB said the monthly repayment for a new five-year €100,000 fixed-rate AIB green mortgage with a loan value of 50 to 80 percent over a 25-year term will be €455.91. The previous monthly repayment would have been €431.
Both the Bank of Ireland and Permanent TSB said they were keeping an eye on interest rates.
https://www.independent.ie/business/personal-finance/property-mortgages/bank-of-ireland-and-ptsb-to-match-aibs-mortgage-rate-hike-within-days-say-experts-42068486.html Experts say Bank of Ireland and PTSB would “follow AIB’s mortgage rate hike within days”.