Relief for property owners as AIB cuts variable rate

Almost 150,000 homeowners are to get a long-awaited break on their mortgages after AIB bowed to pressure to cut variable rates.

However, the 0.25% cut still leaves standard variable rate mortgages among the dearest in Europe and there have been renewed calls for more cuts to reflect the historically low European Central Bank lending rates.

Bank of Ireland and Permanent TSB, which have also shied away from easing their rates despite a succession of ECB cuts, have declined to say whether they will follow AIB’s lead.

The AIB cut also applies to EBS and Haven, which belong to AIB Group. It takes effect from December 1 and will save a customer with a 25-year, €200,000 mortgage €344 per year.

However, it still leaves the standard variable rate above 4% even as homeowners on tracker mortgages pay on average just over 1%.

The ECB rate has plummeted from 4.5% to 0.05% and banks are losing money on tracker mortgages as a result, leading to claims they have used variable rate customers to subsidise losses.

Fianna Fáil finance spokesman Michael McGrath, said variable rates remained at “rip-off” levels.