More finance houses cut mortgage rates

More financial institutions have reduced interest rates in response to the cut in European Central Bank (ECB) rates last week. Yesterday National Irish Bank (NIB), Permanent TSB and Ulster Bank joined the round of rate reductions announcing a range of new lower interest rates for customers.

NIB has passed on the full 0.5 of a percentage point cut in ECB rates to its mortgage customers with the standard variable mortgage rate falling from 4.75 per cent to 4.25 per cent with immediate effect.

Permanent TSB, the Republic's biggest mortgage lender, has also reduced its standard variable mortgage rate by 0.5 of a percentage point from 4.7 per cent to 4.2 per cent. This rate will apply from December 30th.

The reductions will mean savings of about €40 a month on a €150,000 mortgage taken out over 20 years.

Ulster Bank decided not to pass on the full rate cut in its standard variable rate, trimming rates by 0.4 of a point to 4.2 per cent.

AIB still remains the cheapest mortgage provider having reduced its standard variable interest rate to 3.9 per cent this week. The bank has been very aggressive in winning new mortgage business and has been offering the lowest rate of interest for almost a year.

Bank of Scotland, the bank that triggered the substantial drop in mortgage interest rates available to Irish borrowers when it entered the Irish market two years ago, has not adjusted its rate yet.

Both NIB and Permanent TSB have introduced new fixed-rate mortgages that are based on the lower ECB rate of interest. NIB's two-year fixed-rate mortgage falls from 4.69 per cent to 4.09 per cent.

It is offering a three-year fixed-rate mortgage at 4.5 per cent, down from 5.15 per cent, and over five years the fixed rate falls from 5.64 per cent to 4.99 per cent. The rate of interest for customers who have taken an NIB tracker mortgage falls to 4 per cent.

The bank, which is owned by National Australia Bank, has also cut the rate of interest paid on deposit accounts, including the Government-backed Special Savings Incentive Accounts (SSIAs).

The variable deposit rate on NIB's SSIA account falls by 0.75 of a percentage point to 3.25 per cent. This reduction is greater than the 0.5 of a percentage point cut in ECB rates.

Its instant access deposit account will now attract a rate of interest of 0.75 of a percentage point and 2.5 per cent depending on the amount invested compared with 1.1 per cent and 3.1 per cent respectively before the rate cut.

Permanent TSB has also announced new fixed-rate products for its customers. It is now offering a two-year fixed rate of 3.99 per cent for mortgage customers, the cheapest fixed rate announced so far. The bank has yet to announce changes to its deposit interest rates.

Many of the financial institutions have still not announced how the rate cut will affect depositors and are closely watching how their competitors react.