With interest rates set to fall sharply over the next year, TSB Bank has cut its fixed mortgage interest rates and has also introduced new three and five-year fixed-rate mortgages at 7.5 per cent and 7.4 per cent APR respectively.
While money rates on the Irish interbank rates indicate that interest rates will fall by close on 1.5 percentage points by the end of 1998, a spokesman for TSB said that customers are still keen on fixed-rate mortgages.
TSB has cut its one-year fixed rate for new borrowers by 0.25 of a percentage point to 5.95 per cent (7.5 per cent APR) and its two-year fixed rate by half a percentage point to 7 per cent (7.6 per cent APR). The bank has not reduced its variable rate mortgage - which currently stands at 7.4 per cent (7.7 per cent APR).
TSB's chief executive Mr Harry Lorton said that the cut in fixed rates reflects market conditions and a movement towards fixed-rate products. The cut in fixed-rate mortgages is accompanied by cuts in fixed-term deposit rates, from 5.75 per cent to 5.5 per cent for one-year deposits, and from 19.1 per cent to 17.5 per cent for three-year deposits.
But with money market interest rates set to fall by as much as 1.5 percentage points in the next year and retail interest rates expected to follow suit, some investment advisers are sceptical about mortgage holders locking themselves into long-term rates with APRs of more than 7 per cent.
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