AIB Fixed and Variable Rates No Longer Attractive

T

Techhead

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Do we think AIB will come out with either a new fixed rate product or decrease their variable rate?

I would not be alone in thinking their rates are no longer very competitive.

They are being very quiet while other banks sharply under cut their rates.

Their fixed rates are over 3%!
 
Hi Techhead

In a market where the ECB rate is expected to rise at some stage, fixed rates should be higher than variable rates.

Banks such as Bank of Ireland is leaving their variable rates very high because most people are too lethargic to switch to a better product.

Likewise, cash back confuses customers and allows those banks which offer it to maintain the rates for their existing customers artificially high.

AIB is actually being very fair in its model
  • Its fixed rates are higher than its variable rates
  • It passes rate cuts on to existing customers automatically - they don't need to apply for the lower rates
  • It does not give cash back other than the costs of switching.
Of course, all the banks are overcharging customers significantly.

So AIB faces a dilemma. If they cut rates, because they pass them on automatically to existing customers, each cut costs them much more than it costs the other lenders.

I think that they might leave them where they are in AIB or cut them a little bit and compete for new business with EBS where they can give cash back and lower fixed rates.

Brendan
 
Yes, they are uncompetitive for new business. However, if AIB cuts rates by 0.25%, it will cost them 80m profit per annum on their existing mortgage book.
They need to weigh this up with the potential income on new loans, which they can't get through cash back offers through EBS / Haven.
It's hard to know if they'll do anything unless they start losing existing mortgages to switchers, or if as a group they lose market share.

I can see them squeezing the difference between rates for LTV bands, to bring them all down to 3%.

(Saying that, they could drop interest rates next week!)
 
AIB half year results announced this morning show an impact. Share of new mortgage market for he group down further to 32%.
They had 37% share in H1 2017, and 34% in H2 2017.

I know EBS rate move in May won't have had much impact before end of June, but given more recent moves by Ulster and KBC, they're going to have to do something now to meet their stated aim of a mid-30's market share.
 
Bernard Byrne was interviewed on Morning Ireland and said that they would not be chasing market share.

Their share of the stock is also 32% which they are happy with.

He also pointed out that when AIB reduces the variable rates, they pass them on to their existing customers as well.

Brendan
 
How would I find you to collect my winnings? :)

But, in any event, despite what he said, I agree with you that they will have to cut rates.

Brendan
 
Has there been any update on whether AIB will start dropping rates anytime soon?? I'm in the very early stages on a possible switch to Ulster Bank from AIB so a drop in rates from AIB could save a lot of hassle.
 
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