AIB raises cost of fixed-rate and buy-to-let mortgages

HOMEOWNERS are to be hit again by rising mortgage costs as AIB raises its fixed-rate offering.

The bank is following other lenders by hiking the cost of mortgages for customers, many of whom are struggling to repay.

From today, AIB is increasing its one-year fixed rate for owner-occupiers rises to 4.15% from 3.59%, while its five-year rate will increase to 5.35% from 4.39%. It blamed the rising costs of fixed-rate mortgage financing for the hikes.

Rates for buy-to-let mortgages will also increase at AIB.

The Professional Insurance Brokers Association (PIBA) said the move is “merely the latest in an upward cycle that is likely to last for a number of years.”

Director of PIBA mortgage services Rachel Doyle said: “Unfortunately for mortgage holders we are now seeing the end of the low-interest rate era.

“Non-tracker mortgage holders who have not already fixed need to review their situation urgently. However, we would consider that fixing for short periods of a few years would be unwise. Fixing for five years or longer would be a much better option and gives a level of security.”

This news comes as fears mount the European Central Bank (ECB) will hike interest rates next month from their record low of 1%. An ECB move to increase rates would affect those on tracker or standard variable rate mortgages.

Ms Doyle warned that as the ECB has indicted it could raise its rate as early as April, “variable-rate mortgage holders are likely to see increases on the double”.

“The majority of existing variable-rate mortgage holders are not taking on board the message about the security and value attaching to fixing at a good rate for periods of five years or longer. Only 16%, of mortgage holders are on fixed rates,” she said.

Kevin McNerney, a broker member of the Trusted Advisor Group, said that what is most unfair about the rate hike is that mortgage holders did not receive a fair warning.

“To give 24 hours notice of a rate increase is a disgrace and although the Government cannot control the banks rates they should certainly intervene in the manner in which the hikes are introduced — whereby they do not allow for any flexibility for existing borrowers to assess their options.”

Irish Brokers’ Association chief executive Ciaran Phelan said that although homeowners knew the changes were coming its not going to make it any easier on the effected mortgage holders.

“This is just a further example of banks trying to recoup the losses they have suffered by targeting vulnerable mortgage holders.”

He said the increases are substantial and will simply not be affordable for many people.