AIB offers four-month moratorium on rate rises over tracker mortgage error

Thousands of tracker mortgage customers at AIB are getting a four-month reprieve on the most recent European Central Bank rise in interest rates.

The bank said about 33,000 tracker mortgage accounts that were transferred across to AIB from Ulster Bank in July would benefit from the freeze on rate rises.

AIB said the four-month deferral was “in recognition of the confusion and concern that may have been caused for these customers by a letter they received last month”.

The letters following the latest ECB rate rise miscalculated what the 33,000 Ulster Bank tracker customers whose loans were acquired by AIB in a €5.7 billion deal should be paying. Customers were told that they faced sharp increases in their loan repayments of up to €600 a month. Customers closer to the end of their mortgage term were the worst affected.

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The bank reacted swiftly, withdrawing the letters in the face of customer protests and conceding that they had been issued in error.

The announcement on Wednesday means that higher payments which had been due to kick in from October on the back of the ECB’s most recent rate rise in July will not now do so until February of next year in a move that will cost AIB several million euro.

Any further increase announced between now and February will also be frozen until that time. The ECB is meeting this week with opinions sharply divided on whether it will raises rates on lending by another quarter percentage point. The bank is expected to trigger another quarter-point increase but that may not now happen until October, according to analysts.

“AIB would like to apologise again and reassure customers that no incorrect repayments were made and no customer is out of pocket as a result,” the bank said in a statement.

“Given the evolving interest rate environment, we will write to these customers in December to advise them of what their February 2024 repayment will be.”

The four-month moratorium means homeowners with the affected tracker mortgages will essentially save money on their monthly payments. How much that is will depend on the amount owing and time remaining on the mortgage.

For someone with about 10 years remaining and an outstanding mortgage balance in the region of €120,000, the savings will amount to about €14 a month, or €56 in total. They will save a similar amount per month on any additional increase that could be announced this week.

AIB has confirmed that there will be no cost or clawback of payments to customers for these deferrals.

A further 10,000 to 14,000 Ulster Bank tracker customers whose accounts have not yet moved across to AIB, but will do over the coming months, are not affected by the announcement.