AIB and Permanent TSB have joined other financial institutions in passing on the lower interest rates in response to a cut in European Central Bank (ECB) rates last week.
AIB's standard variable mortgage rate remains the cheapest in the market, falling from 3.85 per cent to 3.7 per cent. The bank has opted to bring its rates down by 0.17 of a percentage point, less than the 0.25 of a percentage point fall in ECB rates to 2.5 per cent.
Permanent TSB has passed on the full 0.25 of a percentage point reduction in interest rates only to new customers with the new business variable rate falling from 3.44 per cent to 3.19 per cent. Its standard variable mortgage rate, which applies to existing customers, has been reduced by just 0.15 of a percentage point to 4.05 per cent.
By failing to pass on the full 0.25 of a percentage point rate reduction to existing customers, Irish financial institutions have effectively widened their profit margins on this type of business.
Both banks have aggressively lowered their fixed rate mortgages for customers who may want to lock into current interest rates.
AIB is offering a one-year fixed rate mortgage at 2.95 per cent compared with its previous offering of 3.4 per cent. Over two years the fixed rate falls from 3.99 to 3.68 while over five years borrowers can lock into a rate of interest of 4.4 per cent, down from 4.75 per cent.
AIB's new rates will come into effect from March 12th.
Permanent TSB's one-year fixed rate mortgage for new customers falls by 0.4 of a percentage point to 2.95 per cent. Over two years it is offering a fixed rate of 3.49 per cent, down 0.2 of a percentage point. Over three years its fixed rate is 3.95 per cent.
Announcing the rate cuts yesterday, Permanent TSB head of marketing, Mr Niall O'Grady, said the bank was expecting a further cut in ECB rates in the weeks ahead. "We believe that the pressure will continue on the ECB to lower rates again and we're reflecting that in our new fixed rates."
The two banks have so far held off reducing deposit interest rates but are likely to lower these rates in the coming weeks.
