AIB has announced a reduction of 0.25 per cent to its Standard Variable Rate (SVR) mortgages for owner occupier and buy-to-let customers.

It is the fourth rate reduction in 18 months and its SVR falls to 3.4 per cent.

The latest rates apply to new and existing customers and will take effect from 1st July, 2016.

The move is likely to put pressure on the other lenders in the market and comes as the newly formed Government considers ways it can compel banks to pass on lower rates to SVR customers. Yesterday KBC announced that it was cutting its fixed rates and also reducing its standard variable rate for new borrowers , highlighting the increasing competition in the market.

The AIB rate reduction will be supported by the introduction of a €2,000 contribution towards professional fees for all customers switching to AIB.

"When we started reducing rates in late 2014 we committed that as AIB's financial performance and funding conditions continued to improve, we would keep key rates under review," said AIB's managing director of retail, business and corporate banking, Robert Mulhall.

Benefits

“We are now in a position to pass on a further rate reduction to our customers. This is the fourth variable rate cut in a year and a half. During that period we have brought rates down by 1 per cent, clearly demonstrating our commitment to keeping mortgage rates under constant review and passing on benefits when we can.”

He said customers of other banks could materially benefit by moving their mortgage to AIB and pointed to the cash incentive being offered.

The latest move will benefit around 76,000 mortgage accounts, leading to very significant annual savings.

And owner occupier customers with a €200,000 mortgage on a 25 year term will save an additional €320 per annum following this announcement.

The combined annual savings from the four reductions announced by AIB in the last 18 months is approximately €1,300.

The announcement was welcomed by the Minister for Finance Michael Noonan who said it was “illustrative of the increasingly competitive mortgage market we now have in Ireland”.

He said more competition was “a priority for this government and this latest move along with the previous rate reductions from AIB benefits approximately 76,000 mortgage accounts leading to very significant annual savings for households across the country.”

Welcoming the bank’s cash initiative to switching customers he urged more mortgage customers “to continue to shop around to avail of the best rate.”

Meanwhile KBC also rolled out a range of rate cuts of its own. New customers with a Loan To Value of 80 per cent can availabe of a variable rate of 3.2 per cent, a cut of 0.1 per cent on the current rate.

Switchers or new customers who opt for a two-year fixed rate mortgage will be able to get a rate of 2.99 per cent.