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Bank of Ireland cuts all its fixed home mortgage rates by 0.5%

Move puts lender’s rates close to rival AIB as analysts expect European Central Bank to cut interest rates again in December

Bank of Ireland is cutting its fixed rates. Photograph: Brian Lawless/PA Wire
Bank of Ireland is cutting its fixed rates. Photograph: Brian Lawless/PA Wire
Joe Brennan
Tue Nov 19 2024 - 10:07

Bank of Ireland will cut all of its fixed-mortgage rates by 0.5 of a percentage point on Tuesday in a move that will see it almost match rival AIB with the best rate on offer for homes with a high energy-efficiency rating.

The move sees its four-year fixed rate for an owner-occupier property with a Building Energy Rating (BER) of A fall to 3.1 per cent. AIB set its lowest rate at 3 per cent last month for three-year fixed mortgages where the building has an A rating.

The new four-year rate for Bank of Ireland mortgages where the property is BER exempt is 3.45 per cent. The highest new owner-occupier rate is 4.55 per cent for a 10-year fixed period where the home is BER exempt.

The move comes as economists and the short-term debt markets widely expect the European Central Bank (ECB) to cut official rates next month for a fourth time since early June as inflation appears to have fallen under control. Analysts have begun to lower their 2025 earnings forecasts for banks in recent times as interest rates fall at a faster pace than had been expected earlier this year.

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Debt market investors expect that the ECB key deposit rate, which has fallen from 4 per cent to 3.75 per cent since June, will decline by more than a further 1.25 percentage points over the next 12 months, according to traders.

“Offering value to our customers is important, so this 0.5 per cent cut is being applied to our full suite of fixed rate products,” said Alan Hartley, director of homebuying at Bank of Ireland. “These reduced rates are available to all new and existing customers from today and they apply all the way up and down the BER scale, not just to those homes with the best energy ratings.”

Bank of Ireland has also tweaked its deposit offering, introducing a new 18-month so-called advantage fixed term deposit account with an annual equivalent rate (AER) of 2.98 per cent. However, it is removing its 24-year fixed-term offering with an AER of 2.96 per cent.

Irish banks continue to secure about 90 per cent of their deposit funding from current and non-term accounts that offer little or no interest.

Bank of Ireland moved in April to rework its fixed-rate green mortgage range to offer customers discounts for homes with energy-efficiency ratings of A right down to G. The new so-called EcoSaver mortgage replaced the bank’s current green mortgage offering effective for new business or existing customers who move to the new product from another one with the bank.

Bank of Ireland’s loan book increased by 4 per cent on the year to €82.5 billion at the end of September, it said in a trading update last month. The bank’s retail Ireland net lending increased by €1.4 billion, supported by continued growth in mortgage lending. Its market share of new home loans was 41 per cent for the first nine months of the year.

Analysts estimate that loan book growth among the Irish banks over the coming years will partly offset the impact of declining interest rates.

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Joe Brennan

Joe Brennan

Joe Brennan is Markets Correspondent of The Irish Times