AIB to launch interest rate cut option for homeowners in arrears
State-owned AIB is to launch a new option for homeowners in arrears that will see the interest rate they pay slashed.
A family with a €200,000 mortgage on a variable rate of 4.5pc could see their monthly repayments drop by as much as €400 under the plan.
The move will see those in financial trouble offered the option of having the interest rate they pay cut to as low as 0.5pc. The new product is to be unveiled before the summer and will apply to those on tracker and variable-rate mortgages.
One in 10 of the mortgage customers at AIB, and its subsidiaries EBS and Haven, is behind on their residential home-loan payments.
The bank had no comment, but it is understood the new product for those in arrears will see the bank offering interest rates of between 0.5pc and 2.5pc. The bank will decide which homeowners in arrears are offered the super-low interest rate.
Ulster Bank has a similar 0.5pc interest rate product for its customers in mortgage arrears.
AIB’s rate-slashing plan will apply to those on tracker mortgages also, even though these are among the cheapest mortgages already. Most homeowners on trackers are currently paying around 1.5pc.
The bank already offers mortgage repayment holidays and split mortgages, which see part of the principal owned put to one side for a number of years, with no payments made on it and no interest incurred on this portion of the debt.
AIB has been writing off debts for a select number of homeowners who are offered split mortgages.
Last week it emerged that a Cork family got €195,000 written off their mortgage.
AIB, which includes EBS, has now agreed 100 deals with mortgage holders which have involved some form of debt write-off, according to the organisation which has negotiated the deals. The Cork family has been told by EBS it will forgive €195,000 of the mortgage borrowings, and now seek repayments on less than half of the money owed.
The family will also remain in the home. The mother is not working, and the father is in the building trade but has seen his income fall sharply. There are two children and the parents are in their late 30s.
Meanwhile, the latest debt deal has seen a Munster-based family get €48,000 written off their AIB mortgage, according to Kerry-based Prima Finance Debt Solutions.
Another €33,000 has been warehoused in a split mortgage arrangement, according to Brian Leslie of the debt management company. The family will get to stay in their home.
But other banks, including Bank of Ireland, are not offering debt write-off deals, experts said.