Duffy says AIB mortgage hike is necessary
Bailed-out Allied Irish Banks (AIB) is to hike its variable mortgage rate by 0.5%.
The State-owned bank said that, while it was aware of the financial impact the increase could have on its customers, the move was necessary to prevent further loss-making.
Chief executive David Duffy said the rate increase – the second hike in two months – was part of the ongoing transformation of the bank’s operating base.
“AIB does not have an option of continuing to provide mortgages on a loss-making basis at pricing materially below our market competitors, as is currently the case,” said Mr Duffy.
“To do so would only see further erosion of the capital provided to the bank by the State.”
Around 70,000 customers – one in five mortgage holders – are expected to be hit with the half percentage point rise, which takes effect from November 13.
Earlier this week, the bank repaid €1bn to senior unsecured bondholders.
Mr Duffy said it was important for the bank to reduce its dependency on the State.
“The bank is making significant progress in implementing a series of difficult but necessary steps, including 2,500 redundancies, downsizing and restructuring its business, re-pricing of products and services and staff pay reductions,” he added.
In July, AIB announced plans to close 67 branches across the country – 51 of which will shut up shop by the end of the year and the remaining 16 in 2013.
The bank confirmed that 350 employees would be affected by the closures, but insisted there would be no compulsory redundancies.
AIB had announced plans in March to lay off a sixth of its workforce – 2,500 people – by the end of 2013.
Half of the redundancies will be made by the end of this year and the remainder by the end of next year.
The bank said its aim was to make savings of €170m a year.
