AIB IS TO INCREASE its variable mortgage interest rates by 0.5 per cent from next month – a move that is likely to hit about 70,000 customers.
The increase, which kicks in on November 13, will add €56.50 to the monthly repayments on a 25-year mortgage worth €250,000.
The move comes only a week after Bank of Ireland announced a similar increase which will take effect in three weeks’ time.
Bank chief executive David Duffy said while the bank was “acutely aware” of the impact its decision would have, it was necessary if AIB was to return to profit.
“AIB does not have an option of continuing to provide mortgages on a loss-making basis at pricing materially below our market competitors, as is currently the case,” he said.
The repayment comes only two days after the bank – which has received €20.7 billion in State aid, and is now 99.8 per cent owned by the taxpayer – repaid a €1 billion unsecured bond which was not covered under the terms of the bank guarantee.
The financial regulator has previously expressed reluctance to accept any powers which would give it the right to force banks to adopt certain interest rates.
The AIB and Bank of Ireland increases come in spite of reductions to the ECB’s main interest rate, which has been halved in the last twelve months from 1.5 per cent to 0.75 per cent – cuts which took immediate impacts on the interest rate applied to tracker mortgages.
Most commercial banks claim, however, that they are not primarily dependant on ECB funding and that the cuts to interest rates do not save them much money.
To embed this post, copy the code below on your site
have your say