AIB first with higher mortgage rates after ECB’s fifth move

Other lenders are keeping their pricing under review

AIB said on Thursday that it is increasing mortgage rates again, moving within hours of the European Central Bank’s (ECB) decision to hike official rate for a fifth time since July, as rivals said they were keeping their home loans pricing under review.

The country’s largest mortgage lender said that it is increasing fixed and variable rate mortgages by an average of 0.5 of a percentage point across its AIB and Haven branded products. It follows on from AIB increasing new fixed rates by a total of one point late last year.

The ECB has raised its main lending rate from zero to 3 per cent since July and its president, Christine Lagarde, said on Thursday that another half-point move is planned next month.

She signalled that the ECB will move further in the following months, with euro zone inflation currently running at more than four times the organisation’s 2 per cent target.


AIB’s decision to increase its variable rates by 0.35 per cent, effective from mid-March, will bring the cost of such loans where homeowners are borrowing up to 80 per cent of the value of a property up to 3.5 per cent.

It marks the first move by a mainstream bank on this type of product since the ECB started this cycle of rate hikes. Still, AIB’s variable rates remain among the cheapest in the market.

The increase in fixed rates, ranging from 0.3 to 0.75 of a point, take effect for new business from Friday.

Thursday’s ECB increase will be passed on automatically to an estimated 240,000 Irish tracker mortgage loans across the sector.

A spokesman for Bank of Ireland and spokeswoman for Permanent TSB said that they were keeping rates under review, aside from the passing on of the ECB increase to tracker customers.

Spokesmen for nonbank lenders Finance Ireland and ICS Mortgages said that they were also keeping their rates under review. Representatives for the sixth mortgage lender in the market, Avant Money, did not immediately respond to a request for comment.

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The ECB also increased its deposit rate by half a point on Thursday, to 2.5 per cent.

AIB said it is also increasing rates across a range of deposit product from February 21st. For example, it will then offer a 1 per cent annual rate for the first €1,000 deposited per month by regular savers who commit to locking up the money for a year. The current rate on this product is 0.1 per cent.

The bank will also start paying interest on personal and business demand product accounts, albeit at a rate of 0.1 per cent.

Joe Brennan

Joe Brennan

Joe Brennan is Markets Correspondent of The Irish Times