AIB’s planned increase to its mortgage switching payment is likely to benefit owners of homes with a high energy rating, but others could be lured into paying higher interest rates, an expert cautioned.
AIB announced it will hike the payment available to eligible customers who want to switch mortgage provider from €2,000 to €3,000 across its brands, including EBS and Haven.
Dowling Financial managing director and broker Michael Dowling said the increased payment will be attractive to many customers as the usual cost of switching is around €1,000, but he urged caution as some homeowners could be paying more in the long run.
AIB offers the cheapest so-called green mortgage rates on the market in the Republic, available for customers who own a home with an energy rating of B3 or higher, but the lender also offers some of the dearest rates for non-green mortgages, said Mr Dowling.
“Homeowners with an energy rating of C1 or less can get much cheaper rates elsewhere,” he said, adding that switching to AIB with a home that has a lower energy rating provides “no advantage”.
Around 75% of all properties on the market have an energy rating of C3 or less, said Mr Dowling.
However, Mr Dowling added that “any incentive that reduces the cost of switching is welcome”.
Around 70,000 mortgage holders will come off their fixed rate contract this year, and the increased payment from AIB could potentially heat up the switcher market as customers search for alternative options.
Those coming to the end of their fixed term are paying back their existing mortgage loans at rates of around 2.25%; however, new fixed-rate mortgages will be significantly costlier even if the European Central Bank cuts its main lending rate this year.
“We know the mortgage process can seem a bit overwhelming,” said AIB managing director of retail banking Geraldine Casey.
“That’s why we’re making it easier for customers to switch to us by increasing the switcher payment, so customers have more support in covering their costs,” she said.
AIB said the payment would be available across its brands for customers who draw down their mortgage from May 27.
