Ulster Bank is to reduce its fixed rates for new and existing customers and make it easier for them to qualify for the new interest rates.
The reductions are likely to tempt other banks to cut their lending costs.
Ulster Bank said that half of all new customers – including first-time buyers and switchers – are now opting for a fixed rate.
The move by Ulster Bank will see it offer a three-year fixed rate of 2.9pc for those whose loan is 60pc or less than the value of the property, the Irish Independent has learned.
The bank calls this its Loyalty Plus rate and claims it is the lowest on the market. It is down from 2.99pc. The new rate compares with a normal three-year fixed rate of 3.25pc.
The bank has also opened the Loyalty Plus fixed rate to those whose mortgage is at least €200,000. Previously, you had to have a mortgage of at least €350,000 to benefit from the reduced Loyalty Plus fixed rate.
The bank has also removed the minimum loan threshold for what it calls its Loyalty products for existing customers.
Loyalty rates are not as low as the Loyalty Plus ones, but are much lower than the bank’s standard fixed rates.
The bank is also cutting its variable rate for Loyalty Plus customers to as low as 3pc for those with a lot of equity in their home. This compares with the bank’s standard variable rate for those with a 90pc loan to value of 4.3pc.
To benefit from the Loyalty and Loyalty Plus, where the rates are even lower, customers must have their salary mandated into an Ulster Bank current account. The bank last cut its rates in August.
Ulster Bank’s director of customer experience and products, Maeve McMahon, said: “We are delighted to be cutting our rates for new and existing customers again, with rates available as low as 2.9pc.”
She said the bank financed 5,000 home purchases last year, with the numbers expected to be higher this year.
Ms McMahon said a customer with a €300,000 mortgage who is currently on a 4.3pc variable rate could save €170 a month by opting for the three-year fixed Loyalty Plus rate of 3.2pc.
The rate cut comes as the Competition and Consumer Protection Commission carries out a major study on why mortgage rates are so high here compared with the rest of the eurozone.
Figures produced by the Central Bank in the past few days show that the average interest rate on new mortgages fell by 0.24pc to 3.38pc in the year to February.
This compares with an equivalent eurozone rate of 1.8pc. This means Irish people are paying 80pc more than the average in the euro area.
However, the Competition and Consumer Protection Commission has come out against moves by politicians to cap variable mortgage rates, raising fears the legislation will not be enacted.
The commission claims the Michael McGrath-sponsored bill will limit competition.
The Central Bank, European Commission, European Central Bank and Finance Minister Michael Noonan are all opposed to the mortgage-capping bill.
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