AIB PLANS to cap the commission it pays mortgage brokers at €1,500, in a move that the Professional Insurance Brokers Association (PIBA) said was further indication that the banks “don’t want to lend money”.

The bank, which pays 0.5 per cent commission on mortgages, will cap the payment from September 1st in a bid to cut costs, according to a letter sent to brokers and confirmed by the bank yesterday.

PIBA chief executive Diarmuid Kelly described AIB’s move as “a sideswipe at the broker market” that would not be good for consumers.

AIB cut its commission by half from 1 per cent last year, while other lenders also reduced their payments to brokers as funding costs soared.

The trend was initially kicked off by Permanent TSB, which reduced its commission rate to 0.8 per cent, which was then matched by other lenders. However, AIB took its commission rate down to 0.5 per cent.

Permanent TSB, which recently increased its standard variable mortgage interest rate in a bid to boost margins, yesterday said it had no plans to introduce a cap on payments to brokers.

“I think it’s quite a cynical move by AIB and I would hope that others don’t follow it,” said Mr Kelly, who also criticised the bank’s rules on the clawback of commissions.

“I would hope that others would remember that business will eventually turn, and lenders that make cynical, short-term moves like this won’t reap the rewards,” he said.

“They’re not coming out with any extra value products for the market.

“They’re doing it because they can and because they’re rationing credit.” A vibrant broker market is good for consumers, Mr Kelly added.

In its half-year results this month, AIB said it was maintaining an active focus on costs.

“It’s frustrating,” said Karl Deeter, operations manager at Dublin-based Irish Mortgage Brokers, who estimates that about half of his business goes to AIB.

“From our point of view, the bank is moving job losses into the intermediary channel and away from its own branch network.”

The number of mortgages issued in Ireland in the second quarter fell 64 per cent compared to the same period in 2008, according to industry figures released earlier this week.

The average mortgage issued to first-time buyers, who accounted for one-quarter of all home loans, was €206,517. – (Additional reporting: Bloomberg)