AIB will increase interest rates it charges on new fixed-rate mortgages by 0.5 percentage points for customers taking out home loans with the bank and its EBS and Haven subsidiaries.
The decision follow two consecutive hikes in the cost of borrowing from the European Central Bank, which raised interest rates, for the first time in 11 years, by 0.5 points in July, and again by 0.75 points in September, in response to heightened inflation across the eurozone.
The announcement by AIB does not affect existing fixed-rate and mortgage customers, but will also affect customers switching their mortgage to an AIB fixed rate. Currently, more than half of the bank's mortgage customers are on fixed rates.
Customers who already have mortgage approval with AIB and draw down their mortgage before 14 November will be able to avail of the old fixed rates.
Customers on AIB tracker mortgages have already seen their interest rates increase 1.25% with the ECB raises, and the bank becomes the first of Ireland's five main retail banks to raise fixed or variable rates since the ECB decisions.
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"AIB has until now only passed on interest rate increases to tracker mortgage customers as the bank is contractually obliged to do," the bank said in statement
"The new rates are effective from close of business 14 October 2022. However, customers who draw down a new mortgage by 14 November 2022 can avail of the previous fixed rates.
"As sustainability is a priority for AIB, we continue to offer lower green mortgage fixed rates to customers buying homes with an energy rating of B3 or higher."
A number of non-bank lenders have already passed the hikes onto their customers, and similarly, banks across Europe have done the same.
In reaction to the announcement, Association of Irish Mortgage Advisors chairman Trevor Grant said it was good that AIB had decided to allow customers with mortgage approval to pay the old rate after Finance Ireland had initially opted not to when it raised its interest rates.
Otherwise, he said the announcement was "expected and understandable" and not "as bad as could have been expected". He added that it would push mortgage holders to assess their current terms and look for better value elsewhere.
"We anticipate further ECB rate hikes before year end, therefore there is a limited window for many to make the switch to a better deal and avoid the impact of further oncoming rate increases," Grant added.
The Central Bank said this week that interest rates on Irish mortgages had risen 1bps in August to 2.64%, which is 43bps higher than the eurozone average of 2.21%.
(Pic: Leah Farrell/RollingNews.ie)
