AIB races ahead in mortgage market as BoI and smaller lenders lose out

State-owned AIB has increased its share of the mortgage market at the expense of rivals Bank of Ireland, KBC and Permanent TSB.

The lender is gaining from having some of the lowest variable rates, and by having the Haven broker channel.

The bank, which is due to sell a chunk of its shares in the next two months, has a 35pc share of the new mortgage lending market.

Bank of Ireland’s share of new home-loan lending is now around 25pc, according to figures compiled by analyst Philip O’Sullivan at specialist bank Investec.

Traditionally, AIB and Bank of Ireland were neck-and-neck in terms of their share of the mortgage market.

The focus of Bank of Ireland on its fixed rates appears to be impacting its share of new property lending. The bank has one of the highest variable rates, but it also offers new borrowers up to 3pc of the value of the mortgage drawn down in cash back.

Bank of Ireland no longer has a broker channel since it sold ICS to Dilosk, which analysts said was a drawback.

The other big winner appears to be Ulster Bank. It said recently when it issued financial results that it has an 18pc share of new mortgage lending.

“In broad terms, AIB has been picking up some market share. Bank of Ireland has lost a small bit of share, given its fixed rate focus,” Mr O’Sullivan said.

“Ulster has made big gains off a modest base; and Permanent TSB and KBC are both slightly down.”

KBC Bank, which offers a discount off its mortgage interest rate for those who open a current account with it, now has a market share of around 12pc, Investec said.Permanent TSB, which is due to announce financial results this week, is estimated by Investec to have a 10pc share of the new mortgage market.

Banking and Payments Federation Ireland figures show that total mortgage lending last year was €5.65bn. Investec expects the value of mortgage lending to rise to €7bn this year, 25pc higher than last year.

This indicates it is a fast-growing market. All lenders are likely to gain in this scenario, Mr O’Sullivan said.

They will not be too worried if they lose a percentage point or two in market share, he said.

A Bank of Ireland spokesman said it is focused on a fixed rate product offering, with fixed rates starting from 3.1pc. It said 75pc of new mortgages in 2016 were drawn on a fixed rate.

Meanwhile, banks have begun to write to their customers who are on variables explaining how they set their rates, and pointing out that customers could get a better-value rate. It is a Central Bank initiative.

One letter to a variable rate customer from Bank of Ireland sets out 12 factors it considers when setting its variable rate.

“We may have a rate available that is better value for you than the rate we currently charge you,” the letter says, and directs the customer to its website.

The move by the Central Bank has been heavily criticised by Brendan Burgess of the Fair Mortgage Rates campaign as being too weak.

He said the changes will be of no help to mortgage holders who are paying almost twice the rate being charged in other eurozone countries.
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