First Active has become the second mortgage lender to announce plans to reduce lending rates early in the new year.
The bank will cut its variable mortgage interest rate by half of a percentage point to 5.5 per cent with effect from January 4th for new borrowers. For existing mortgage holders the lower rates will start to come into effect from January 15th.
The reduction will mean savings of £14.27 per month on a typical £50,000 annuity mortgage and £22.83 per month on an £80,000 mortgage.
But no decision has been made yet on reductions in interest payments to depositors, according to First Active general manager for retail banking, Mr Richard Hoare. The bank plans to issue a new table of deposit rates after Christmas, he said.
"Because savings rates have gone so low now there is not much scope for significant changes. But we expect that customers will not confine themselves to the traditional savings products. So we have to find ways to be more innovative in the savings and investment markets," he said. First Active's mortgage rate reduction follows the 0.7 of a point interest rate cut by the Central Bank at the beginning of December, bringing market interest rates to just 3 per cent.
The Irish Permanent moved quickly after the Central Bank reduction announcing a 0.5 of a percentage point cut in its standard variable mortgage rate to 5.5 per cent from January 1st. First Active is just the second mortgage provider to announce an imminent reduction in its lending rates.
In addition to reductions in variable mortgage rates First Active is reducing interest rates on fixed-rate mortgages. The one year fixed rate will come down from 4.99 per cent to 4.5 per cent. The new two year fixed rate will be 5.1 per cent, down from 5.6 per cent. The three-year fixed rate will come down from 5.6 per cent to 5.25 per cent. The rates on the four-year fixed rate product will change from 4.99 per cent to 4.5 per cent in the first year and from 5.6 per cent to 5.10 per cent in years two to four.
