A MORTGAGE war between the major lenders may be on the way after National Irish Bank decided to cut its mortgage rates by half a percentage point from Monday.
Other lenders have not yet followed and are considering their position. Savers will be the losers as the small amount they earn on their deposits is likely to be cut further. The Minister for Finance, Mr Quinn, called on other lenders to follow suit.
NIB announced it will cut its variable mortgage rate by 0.5 of a percentage from the close of business on February 12th. Borrowers will now pay 6.7 per cent, down from 7.2 per cent. A borrower with a £40,000 variable mortgage with NIB will save £12 a month, while someone with a £60,000 mortgage will save £18 a month.
The other lenders are expected to follow suit. "I wouldn't be at all surprised to see the other lenders going," said Dr Dan McLaughlin, chief economist at Riada Stockbrokers. "But not all will cut a full half point. We can expect some quarter-point cuts," he added.
Last week, Mr Mick Osborne, treasurer at First National Building Society, said if one institution cuts, - all the others will have to follow".
Spokesmen for AIB and Ulster Bank's said they were "watching band monitoring" the situation _ closely.
Privately, most banks will say they will be watching the situation every day. If another bank or building society moves, all will be forced to follow, one director said. "But NIB is quite small, so we don't have to move quite yet," he added.
The problem for most lenders is that it is very difficult to cut rates further for small savers. An instant access account at the Irish Permanent, for example, only pays interest at 0.25 per cent.
NIB now offers the lowest variable rate on the market but it is only fractionally below competitors such as Irish Permanent, EBS and Irish Nationwide Building Society.
Welcoming the move by National Irish Bank, Mr Quinn said it confirmed his view that recent reductions in interbank rates have, created scope for a further reduction of half a percentage point in retail lending and mortgage rates. He called on other lenders to follow National Irish Bank.
