AIB unveiled a raft of rate cuts for its fixed-term mortgages on properties that don’t qualify for a preferential green loan (essentially homes that don’t have an A or B energy rating).
It’s a welcome development for borrowers, if long overdue, given that there have been seven rate cuts in a year by the European Central Bank (ECB), bringing its benchmark deposit rate down to 2.25 per cent.
But why would you bother with these new fixed rates when AIB’s variable equivalent is lower or essentially on a par with those now being offered?
From May 13th, AIB’s one-year fixed rate for “non-green” borrowings with a loan-to-value (LTV) ratio of less than 50 per cent is being reduced to 3.9 per cent from 4.4 per cent.
Yet, according to its website, the variable rate for those with an LTV of less than 50 per cent is 3.75 per cent.
Make it a two-year fixed loan and the rate drops to 3.7 per cent, not much of an incentive to choose it over the variable, especially if you concur with the widely held view of experts that more ECB rate cuts are on the way.
100 days of Trump: “It’s like The Karate Kid, tax on, tax off, tariffs on, tariffs off”
In terms of one-year fixed rates for those with an LTV of between 50 and 80 per cent, the new rate will be 4.05 per cent, versus a variable of 3.95 per cent.
Stretch it to two years and the rate comes down to 3.85 per cent – again, not a huge incentive to fix if you believe that the ECB will cut rates again and that at least some of those savings will be passed on by AIB.
For those with an LTV of more than 80 per cent, the new fixed rate will be 4.15 per cent, in line with the current variable equivalent.
If you’re lucky enough to live in a so-called green home, you can avail of rates as low as 3.1 per cent.
According to the Central Statistics Office, of the 1.2 million homes to receive an energy rating since 2009, 15 per cent got an A and 16 per cent a B rating.
So the other 69 per cent have a rating that bars them from AIB’s best rates. Fertile territory for Revolut to plough whenever it enters the Irish market.
