Bank of Ireland has increased the interest rates on its fixed-rate mortgages and, in a move echoed by its mortgage subsidiary ICS Building Society, introduced a 12-month discount tracker mortgage for new customer, writes Laura Slattery.
Bank of Ireland increased its fixed rates on two, three and five-year fixed-rate mortgages for new customers and for existing customers wishing to switch to a fixed rate. The bank said the increases reflected the sustained changes in the cost of funds over the last number of weeks.
The bank increased its two-year fixed-rate mortgage by 0.2 percentage points to 3.75 per cent. Its three-year fixed rate went up by almost a quarter of a percentage point to 4.19 per cent, while the five-year fixed rate is now 4.69 per cent, up from 4.45 per cent.
Meanwhile, ICS Building Society cut most of its fixed-rate mortgage rates, partially reversing some of the increases it made to its fixed rates in June.
ICS Building Society was one of a handful of lenders to increase fixed rates around that time.
The lender's one-year fixed rate for existing customers was cut by 0.35 percentage points to 3.5 per cent yesterday, following an increase of 0.4 percentage points earlier in the summer.
The two-year rate for existing customers was cut by 0.54 percentage points to 3.75 per cent, following an increase of 0.74 percentage points in June. The two-year fix for new customers was also cut by almost a quarter of a percentage point yesterday and now also stands at 3.75 per cent.
The building society also made cuts to its three-year and five-year fixed rates, which were increased two months ago.
The 12-month discount tracker mortgages offered by the lenders are the first of their kind.
Tracker mortgages are home loans where the interest rate is permanently set at a fixed margin above the European Central Bank (ECB) base interest rate, currently 2 per cent. Any increases or decreases in the ECB rate is passed on to tracker customers automatically.
Under the discount tracker, Bank of Ireland and ICS set the margin at half a percentage point above the ECB rate, meaning the current rate is 2.5 per cent.
Bank of Ireland was among the lenders criticised by mortgage brokers for not letting existing customers switch into tracker mortgages, which are substantially cheaper than standard variable rates.
First-time buyers who opt for fixed-rate discounts in the first year typically revert to its standard variable rate of 3.6 per cent. Under the discount tracker, customers will automatically switch after 12 months to a tracker with a margin of 1.3 per cent, or a current rate of 3.3 per cent.
