Letter from AIB offering to reduce mortgage rate due to lower LTV?

G

Germaine

Registered User
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Hi,

We have an AIB Mortgage Loan.

House is valued at €400k.
Loan owed: €258k
23 years left on Mortgage
Current interest rate is 3.4%

We recently received a letter from AIB advising us that 'there are other mortgage interest rate options that may provide savings to us as outlined below:

PDH LTV Var ≤=50% 3.10%
PDH LTV Var ≥=80% 3.30%

If you wish to amend your current interest rate please complete the enclosed form detailing the new mortgage rate you wish to avail of and return to us...'

QUESTION:
If we were to apply for the 3.30%, will this have any implications for us down the line, as we are currently trying to get all finances in place to make an application to switch mortgage providers as we hope to release €30k equity for works on the house.

I am dubious of why they might write offering to save us money.

Thank you.
 
Hi Germaine

That is a very interesting development.

There is no downside to availing of this.

If you have a variable rate mortgage loan with an Irish lender, you can repay it at any time without penalty.

Brendan
 
Germaine said:
to switch mortgage providers as we hope to release €30k equity for works on the house.
Click to expand...

Why would you not ask AIB for a top-up to do the work?

That would seem the easiest. If you are with the cheapest and most customer-friendly lender, you should probably stay with them.

Brendan
 
OP, looking at your rate I am assuming you are currently on a standard variable rate.

There was a piece of legislation passed that forces banks to inform customers on SVRs if a better rate is available, which explains the letter.

As @Brendan Burgess says, there's no downside to taking the lower LTV rate. You can still switch with no penalties if you choose.
 
OK

AIB customers are allowed to move off the SVR to the LTV rate.

And the Central Bank's new rules oblige lenders to inform customers once a year if better rates are available.

The only small downside in situations like this would be if you were just above the 50% LTV rate band. By waiting until you were below it, you could get that rate.

As far as I know if you accept the <80% rate, you can't later switch to the <50% rate.

Brendan
 
Many thanks for your input. This makes sense now. Yes I called them and they explained that whichever rate you choose, you then cannot change at a future date.

It would make sense then to wait until we were in a position to avail of the <50% rate then wouldn't it?

Thanks also for the tip on the AIB top-up to do the work...had not thought of this at all. Definitely worth exploring.
 
All other things being equal, if you repay at normal amounts over 23 year term, it will be 7 years before you are <50%LTV (I know it's depressing to see the numbers). The mortgage market could change a lot in that time.

If it was me, unless I expected to pay off a lump sum or expected a big increase in market value, I'd be taking the best rate I could get now. Over those 7 years you'd save 1,679 interest.

Over the full term you'd save more by waiting.

Total interest over 23 years (assuming monthly capitalisation)
3.4% 114,240
3.3% 110,517
3.4% 7 years, then 3.1% on remaining term 108,606
 
I also got one of those letters, and im assuming most other clients of aib did too. It looks like the op is ok as he has always been on variable rate. To others though be very careful and read the fine print. You are not allowed move between rates if you previously had a ltv applied to your account. I got caught bought a year ago. I fixed for year, came off and went on to svr. I then got a similar letter asking me to pick an ltv. I went and paid 150 quid to get house valued and picked <80 %. I was approved, by letter a few days later. Couple of days later I was again wrote to saying that this was an error and that because I was previously on an ltv I couldn't jump bands. Saving was miniscule - circa 9 euro a month. But left a very bad taste
 
Update: Did nothing as yet and just received a letter stating there has been a change to the interest rate on our home Mortgage Loan. The bank's Standard Variable Rate applying to our loan will be amended from 3.4% to 3.15% from November 1st...
So by doing nothing we have dropped to 3.1%.
 
Germaine said:
Update: Did nothing as yet and just received a letter stating there has been a change to the interest rate on our home Mortgage Loan. The bank's Standard Variable Rate applying to our loan will be amended from 3.4% to 3.15% from November 1st...
So by doing nothing we have dropped to 3.1%.
Click to expand...

And if you had changed to LTV, it'd be 2.95% now. That rate reduced as well.
 
Can I still change to LTV then considering this change to our mortgage interest rate happened?
I don’t want to pay €150 for a valuation only to find out that I can’t change now due to this recent rate change.
 
Germaine said:
Can I still change to LTV then considering this change to our mortgage interest rate happened?
I don’t want to pay €150 for a valuation only to find out that I can’t change now due to this recent rate change.
Click to expand...
Yes, you should be able to switch from SVR to LTV at any point with AIB.
A quick call to them will confirm. Just make sure you check their approved list if valuers before paying for a valuation.
 
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