Banks take differing approaches to rate cut

There have been differing responses by Irish mortgage lenders to today’s interest rate cut of 50bps to a record low of 1.5 per cent.

While all lenders are obliged to pass on rate reductions to tracker mortgage holders, they have discretion with regard to holders of a variable rate loan. Today’s changes do not apply to holders of a fixed rate mortgage.

National Irish Banksaid it will not pass on the reduction for variable rate customers.

Ulster Bankand First Activehave decided not to pass on the reduction immediately to variable rate mortgage customers.

A spokeswoman said the Ulster Bank Group was reviewing the implications of the rate cut and a decision would be announced "within days". However, the lower interest rate will apply to tracker mortgage holders with both lenders from April 1st.

Halifaxand Bank of Scotland(Ireland) is to pass on the rate cut in full to all customers.

The State's largest mortgage lender Permanent tsbsaid it will pass on the rate cut to all variable mortgages secured against a customer's primary residence.

However, it has not yet decided whether to pass on the reduction with respect to investment properties or holiday homes. Permanent tsb has a residential mortgage loan book valued at around €28 billion, of which 25 per cent is for residential investment properties.

Approximately 80 per cent of buy-to-let properties are on a tracker mortgage, a spokesman added.

AIBis following a similar stance to Permanent tsb and has not yet decided whether to pass on the rate cut to buy-to-let mortgages holders, which account for 29 per cent of its €25 billion residential mortgage lending book in the Republic.

For all owner-occupiers on a variable rate mortgage the interest rate cut will be passed on in full, AIB said.

Bank of Irelandand ICS Building Societysaid they will pass on the rate decrease in full to new and existing variable mortgage holders.

A spokeswoman for Bank of Ireland said no decision has been made with regard to reducing interest rates on loans for investment properties.

While KBC Homeloanssaid it will pass the reduction to all variable rate mortgage customers, it is not passing on the full rate to mortgages secured against holiday or buy-to-let properties. A 25bps reduction will be applied to these mortgages.

EBSsaid it is cutting its standard variable rates by 50bps.

Mortgages secured on a principal residence account for around 72 per cent of the value of the overall mortgage market, with investment properties around 27 per cent.