AIB mortgage rates increase described as ‘double whammy’ by PIBA

Allied Irish Bankers (AIB) has decided to increase its mortgage interest rates after saying it was no longer sustainable for them to continue losing money on loans and they will tighten the amount of money they are prepared to lend to borrowers whose annual income is less than €40,000.

The increase includes a 0.5 percentage point rise in its standard variable rate, which increases to 2.75 per cent and the bank has decided to

Figures released by the Irish Mortgage Corporation suggest that under the new AIB terms, repayments on a €300,000 loan over a 30-year period would increase from €1,147 to €1,225, an increase of €78 per month. Repayments on a €200,000 loan with a 30-year term will increase by €52 per month, from €764 to €816.

The Professional Insurance Brokers Association described the move as a 'double whammy' for taxpayers who were already paying for the bank bailout. A spokesperson for the Association said, "The risk is that banks will feel confident enough to become even more aggressive about the way they treat mortgage holders and businesses. This could be catastrophic for the economy and ironically, for the banks themselves."

Chief executive of the Irish Brokers Association, Ciaran Phelan, believed that AIB seemed 'intent on ensuring mortgage customers pay for the mistakes of management' and warned that competition in the mortgage market was beginning to dry up.

Minister of Finance, Brian Lenihan, said the increase in its variable interest rates by AIB has highlighted the need for a National Assets Management Agency (Nama) to be introduced. He said the rise had been well signalled, yet interest rates would still be lower than those being experienced in the UK.

Mr Lenihan said, "It reflects the cost of funding for AIB and it's yet another example of why we have to put our banks into the right shape. I would point out that English mortgage rates are substantially in excess of ours."

The move was condemned as cynical and opportunistic by opposition parties, with Fine Gael finance Representative Kieran O'Donnell claiming that AIB were 'thumbing its nose to hard pressed mortgage holders and taxpayers'.

Mr O'Donnell said that Mr Lenihan should reveal when he became aware that the increase was going to be imposed and that AIB 'had a nerve to impose the increase' after stalling during recapitalisation negotiations.

Rochelle Martinez, Freelance Web Content Article Writer for three years. Some of her articles are about http://www.quinn-direct.com.