The move is seen as a u-turn for the Irish state-owned lender, as it tries to retain customers who are tempted to look elsewhere for better rates.
Previously, AIB made customers stay on the loan-to-value (LTV) rate that applied when they took out their mortgages. Under the new rules, they can move to a lower rate as their mortgage LTV decreases.
AIB customers who owe less than 50% of the value of their homes could see their mortgage rate fall from as much as 3.15% to 2.75% Similar deals are being offered to customers of AIB’s mortgage subsidiaries EBS and Haven.
A spokesperson for AIB said: “As part of an enhancement of our mortgage proposition, AIB including EBS and Haven took the decision to change its policy and waive its right not to permit downward LTV band movement during the mortgage life cycle.
“To be clear, the bank will not move customers up to a higher LTV band in the event of a fall in house prices.”
It remains to be seen whether or not many customers take the opportunity to switch which requires them to submit a new valuation of their home. At Permanent TSB, only about 30 per cent of customers took up the chance to move to a lower LTV band.
The news comes at the same time as it was reported in the Irish Times that AIB is facing a legal challenge from customers who were denied a tracker rate by the lender.
The bank has paid €1,600 each in compensation to homeowners, admitting it was wrong to deny them the option of moving to a tracker when their fixed-rate contracts expired from 2008. But the bank won’t put these customers back on a low-cost rate because it said it abolished trackers by the time the customers came off a fixed rate, so they would not have benefited from a low tracker rate.
It said it was paying compensation due to a “service failure” but a group of aggrieved customers are unhappy and are taking legal advice as they consider launching a challenge in the High Court.