IIB Homeloans has cut its fixed interest rates in a bid to position itself competitively in the fixed rate market. Laura Slattery reports.

IIB cut its two-year fixed rate by 0.1 percentage points to 3.74 per cent, which is marginally the cheapest rate in that category.

The lender also cut its three-year fixed rate by 0.16 percentage points to 3.99 per cent and its five-year fixed rate by 0.23 percentage points to 4.45 per cent.

IIB did not make any changes to its one-year fixed rate, which at 3.45 per cent is the best one-year rate available to existing customers. The new rates are effective from next Tuesday.

Mr Brían MacManus, chief executive of IIB Homeloans, said the upturn in the global economy hinted at the prospect of rising interest rates and that homewners could now consider fixing their mortgage.

"In line with our own views, we have decided to cut our fixed rates to benefit our existing and potential customers and to reflect our opinion on the market." Two-thirds of IIB's customers are now fixing their mortgages, a significant increase on previous years. Both new and existing customers customers switching to fixed rates account for the increase in popularity.

A growing number of customers are also choosing to split interest loans. IIB Homeloans offers a "mix and match" facility, where homeowners can choose to fix part of their mortgage while retaining a percentage of their mortgage at the variable rate.

Mr MacManus said the split option was "particularly attractive in today's climate".IIB also cut its variable tracker rate for mortgages of €150,000-€250,000 from 3.4 per cent to 3.1 per cent. Its residential investment tracker rate has been reduced from 3.15 to 3.1 per cent.

A First Active spokesman said the bank would review its rates in light of the IIB move.