Other mortgage lenders in Ireland are being urged to follow AIB and reduce variable mortgage interest rate.

Fianna Fáil Finance spokesperson Michael McGrath said there is simply no justification for variable mortgage rates being charged by banks in Ireland.

He said: "AIB's move last week was a step in the right direction. The other banks now need to follow suit and cut the rate they charge on variable products. We need to create a real sense of competition among mortgage lenders in Ireland.

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"The stark reality is that mortgage holders in Ireland on variable rate mortgages are being charged much higher rates of interest than their counterparts in Europe. The typical interest rate on a new mortgage in Ireland is up to 4.5% compared to a euro area average of 2.56%.

"What this actually means is that an Irish mortgage holder with a mortgage of €200,000 is paying almost €4,000 more interest a year than their Eurozone counterpart. This is unjustifiable and unacceptable. The Central Bank has been making some noises about the issue but needs to make its views known in a more forthright manner.

"We need a competitive mortgage market in Ireland both for those taking out a new mortgage and those who wish to switch from one mortgage provider to another. At present, it is almost impossible to switch mortgage lender in Ireland at the moment to avail of a better interest rate."

(CD/JP)