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Bank of Ireland is offering a one-year fixed mortgage rate of 2.45 per cent for first-time buyers as part of a €1 billion fund.

The lower interest rate will apply for 12 months and – assuming no interest rate changes by the European Central Bank over the period – would increase by a minimum of 75 basis points after that point.

Brendan Nevin, director of consumer banking said the interest rate after one year would be determined by factors such as the outstanding loan amount and the loan-to-value ratio.

He said the bank’s mortgage lending criteria continued to require an 8 per cent deposit and was generally limited to five-times earnings.

Since Christmas Mr Nevin said there had been evidence of a small increase in interest levels from potential buyers, although it was too early to say how many of these would translate into loan applications.

Based on an average first-time buyer mortgage of €230,000, Mr Nevin said the mortgage fund could result in the issuing of 4,000 loans.

He said the fund was a “combination” of the bank’s normal lending and its commitments agreed under the Government recapitalisation plan in which €3.5 billion in capital was provided to Bank of Ireland by the State.

“What we are really trying to say is that we are open for business,” he said.