AIB to cut mortgage interest rates by up to 0.38%

AIB has announced reductions of up to 0.38 per cent in its mortgage rates for owner occupier and buy- to-let home loans. These include a cut of 0.25 per cent for AIB's standard variable rate (SVR) customers and 0.38 per cent for its EBS and Haven SVR customers.

The bank also announced reductions in loan to value (LTV) and fixed rate mortgages across AIB, EBS and Haven. AIB is 99.8 per cent owned by the State and has been under pressure to cut its variable mortgage rates. It signalled a rate cut last week when appearing before the Oireachtas finance committee.

The move will benefit about 158,000 mortgage account holders. AIB customers with a €200,000 mortgage will save €329 per annum, based on a 25-year term, whilst EBS/Haven SVR customers will save €508 a year.

Existing SVR Customers who choose to move to a three-year fixed rate option of 3.65 per cent can achieve savings of €654 per annum with AIB, and €900 per annum with EBS. The bank will now offer 3.65 per cent for a three-year fixed and 3.8 per cent for a five-year fixed rate.

These rate reductions will apply to both new and existing customers. The lower SVR rates come in to effect from early June, while revised fixed rates will be introduced next week.

This is the second time in the past six months that AIB has reduced its mortgage rates for new and existing customers.

Commenting on the move, AIB's director of retail and business banking, Bernard Byrne said: "AIB's second reduction in mortgage interest rates in six months reflects the Bank's improved financial performance. We committed to keeping mortgage rates under review and to reduce these rates for both new and existing customers as soon as our funding conditions allowed. We now have a clearer view of our financial position and we are able to pass on the benefits.''

In an trading update this morning, AIB said it was profitable in the first quarter of this year. Its net interest margin, excluding guarantee fees, increased to 1.87 per cent.

The bank’s net loan book increased marginally to €64 billion while lending drawdowns rose by more than 70 per cent compared to the first quarter of 2014.

AIB said there has been a reduction of €1.7 billion since end 2014 in impaired loan volumes to €20.5 billion. The total number of accounts in arrears in the Irish residential mortgage portfolio decreased by 6 per cent since December 2014 and by 23 per cent since December 2013.

It took an overall provision writeback in Q1 2015 of about €300 million.

Commenting on the results, AIB chief executive David Duffy said: "Positive momentum has continued into 2015 with the Group delivering its strategic objectives. On a pre-provision operating basis, underlying performance has continued to improve. Whilst there is inherent volatility in the ongoing restructure of impaired loans, the provision write back in the first quarter is reflective of the improving economic environment and the progress being made in the case by case restructuring of customers in financial difficulty."