AIB announces mortgage interest rate hikes averaging close to half percentage point

AIB is raising mortgage interest rates again, with homeowners facing an average increase of almost half a percentage point on fixed- or variable-rate loans from the bank and its EBS and Haven subsidiaries.

It comes as Minister for Finance Michael McGrath told reporters on Thursday that he has still not decided when he will lift a €500,000 executive pay cap at the lender. There had been an expectation that he would move once the State’s holding fell below 50 per cent.

“I haven’t come to a final view as to what the appropriate level is,” he said. “It is a matter that I will give ongoing consideration to, I have no immediate plans to make a change.”

The average increase in mortgage rates of 0.46 of a percentage point follows an average hike of half a percentage point across AIB and Haven-branded products announced in February. A separate increase of 0.35 per cent on selected variable mortgage rates was also announced by AIB subsidiaries Haven and EBS in April.

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The move came two days after the Government sold a 5 per cent stake in AIB on the market, reducing its holding to 46.9 per cent to leave it in majority private ownership for the first time since its crisis-era bailout.

Making the announcement on Thursday, AIB said that its green-mortgage fixed rates across AIB, EBS and Haven, which are available to customers whose home has an energy rating of B3 or higher, will remain unchanged.

“This means that green mortgages are now priced lower than the equivalent non-green fixed rates by up to 1.35 [percentage points], helping customers to save on their energy and mortgage costs while also helping save the environment,” the group said in a statement.

[ Central bank chiefs warn interest rates will keep rising Fed, ECB and other leaders say tight labour markets mean most aggressive tightening in a generation must continue ]

[ Irish property asking prices down as rising interest rates dampen demand – Daft.ie ]

Green rates aside, fixed rates will rise by between 0.15 and 0.7 of a percentage point at AIB, EBS and Haven.

AIB and Haven variable-mortgage rates will increase by 0.65 of a point from 3.5 per cent to 4.15 per cent and EBS’s variable-mortgage rate will increase by 0.45 of a percentage point from 3.7 per cent to 4.15 per cent.

The new fixed mortgage rates will be applied to existing customers entering a new fixed-rate period from Friday, June 30th. The changes will see AIB’s three-year fixed rate where the loan-to-value is above 80 per cent rising from 4.2 per cent to 4.8 per cent. The five-year rate will rise to 5 per cent from 4.3 per cent while the 10-year fix will be priced at 5.3 per cent, up from 4.65 per cent.

AIB have said that customers who have drawn down their new mortgage by close of business on July 28th can avail of the previous fixed rates.

The bank has said it will write to customers who hold variable-rate mortgages confirming the new interest rate which will take effect from August.

There is no change for customers with a tracker mortgage linked to the ECB rate.

The group also announced that cashback offers for EBS and Haven products are being extended. The EBS 3 per cent back in cash and Haven €5,000 cashback offers were due to expire at the end of this year but are now being extended by a year to the end of 2024.

[ European shares dip on interest rate worries ]

[ McGrath long-fingers call on AIB pay as State stake dips below 50% ]

AIB is also launching two new fixed-term deposit products which are available from Friday and will be available on the AIB Mobile App in the coming weeks. Available to personal and business customers, the new offerings are a two-year fixed term at 2 per cent annual equivalent rate (AER), and a six-month fixed term at a rate of 0.75 per cent AER.

The new savings offerings follow increases to interest rates on other savings products earlier this month, when AIB’s regular saver products were raised to 2 per cent and its one-year, fixed-term deposit rate was increased to 1.5 per cent.

The announcement by AIB comes as the European Central Bank has raised interest rates to 4 per cent since July of last year.