Aib raise mortgage rates

29 March 2010
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AIB is to increase its variable interest rate for mortgage holders by 0.5 percentage points from close of business today. This will add approx €25 for every €100,000 borrowed on typical 25 year term mortgage.

The bank is also increasing its fixed mortgage rates. Tracker rates will not change. The standard variable rate for owner occupiers goes up from 2.25% to 2.75% (APR 2.79%).Aib do not currently offer standard variable rates to new customers opting instead to offer the more expensive ltv variable rates.

Our mortgage calculator has been updated for the rate changes.

We expect the Bank of Ireland Group to follow with increases shortly.

Even after this increase, Aib offer some of the most competitive products in the market.We believe that their 4 and 5 year fixed rates at 3.99% and 4.25% will be seen as good value in a couple of years time.

Fixed rates are now as follows

3 year 3.65%

4 year 3.95%

5 year 4.25%

It is interesting that the rate increase has come a day before the announcement of the Nama figures when we will learn the extent of new capital required by the Bank.Tomorrow will be a sad day for Irish Banking and indeed for all of us ,when we will most likely be forced to take a massive stake in Aib.

One would expect that the cost of borrowing will reduce following the effective nationalization.No doubt a decision to raise rates today as opposed to after tomorrow was more palatable politically.

Probably the most attractive rate on offer at the moment is KBC's offset mortgage rate of 2.45%.This product allows you to place funds on deposit and the deposit is offset against the mortgage when calculating interest. With rates rising and deposit interest in standard deposit accounts being subject to tax it remains an attractive option.

This product is limited to 80% ltv and is not available for switchers.It is available to First time buyers and trading up clients.

Kbc are one of the only lenders not to be decimated by Development loans and actually recorded a profit last year of €95 million .It is comforting for any borrower to feel that their lender will not be forced to charge more on account of bad debts.

For anybody looking to switch Aib or Bank of Ireland are not options.Bank of Ireland Group are only interested in ltv's of 50% or less for switchers whereas Aib will not switch at all .

Kbc and Haven( part of the EBS Group) have attractive switcher propositions with Kbc paying €1,000 towards the cost of switching and consolidating debt up to 40k.