AIB to cut variable mortgage rates and introduce €2,000 switching incentive
Mark Whelan
Staff Writer

AIB is to cut its standard variable rate by 0.25% and introduce a €2,000 switching incentive. Here's what it will mean for existing AIB customers and non-AIB customers.

Spiralling rents, an ongoing housing crisis, the Central Bank’s controversial mortgage lending rules and high standard variable rates have propelled the issue of mortgage reform to the top of the political agenda in Ireland.

Only this morning, Fianna Fáil’s finance spokesman, Michael McGrath was on Morning Ireland, talking of the need to “force” banks to cut variable mortgage rates.

Well, it seems AIB doesn’t need to be "forced" to do anything of the sort, as the bank has just announced a 0.25% cut in its standard variable rate.

Here’s what you need to know.

At least 76,000 customers to benefit from AIB mortgage rate cut

Significantly, AIB’s rate cut is applicable to all new and existing customers who have an owner-occupier or buy-to-let mortgage with the bank. The rate cut, which comes into effect on July 1st, will take the bank’s standard variable rate down to 3.4%.

This is the fourth time in 18 months that the bank has cut mortgage rates, adding up to a total of a 1% standard variable rate cut over the period. And this latest move will place an even brighter spotlight on Ireland’s other leading banks.

How will other banks react?

An estimated 76,000 of AIB's 162,000 mortgage customers are likely to benefit from the cut, but that number could dramatically increase when the potential knock-on effect is considered.

You can be certain that Ireland’s other leading banks will be discussin how to react to the news and it is likely that we’ll see more mortgage rates cut in the coming weeks or months.

How much will customers save?

The exact amount each customer will save as a result of the 0.25% cut depends on the specifics of their mortgage, but by our calculations, a customer with a 25-year mortgage will see their monthly repayment amount fall by €13.42 for every €100,000 borrowed.

€2,000 switching incentive

Another important aspect of AIB’s big announcement is the introduction of a competitive switching incentive to non-AIB customers.

From July 1st, customers who switch their mortgage to AIB will be given €2,000 towards the professional fees associated with switching. This should cover the cost of legal fees and additional valuation reports that are required when switching.

This is one of the best switching incentives currently on offer, with Ulster Bank offering €1,500, Permanent TSB offering 2% cashback until next month and Bank of Ireland offering 2% cashback until September.

Dave Curry of the Irish Mortgage Corporation welcomed news of the rate cut stating; "the latest rate cut from AIB is excellent news for mortgage borrowers. Some other banks will undoubtedly follow suit, but the clear message is that those who are paying higher rates are well advised to join the thousands of consumers who are planning to switch mortgage lenders in 2016".

The number of people switching mortgages more than doubled in the first three months of the year, indicating that customers are beginning to take matters into their own hands when seeking a lower monthly repayment amount.

According to AIB’s Robert Mulhall, “customers of other banks can materially benefit by moving their mortgage to AIB”.

But don’t take Mr. Mulhall’s word for it, head over to our Compare Mortgages page and see how much you could save by switching now.