AIB has confirmed it is to cut its variable and fixed mortgage rates for householders.

Fianna Fail welcomed the announcement however the prty's Finance spokesperson Michael McGrath called on other lenders to "follow suit".

Deputy McGrath said: "The announcement by AIB of variable and fixed rate cuts will hopefully force other lenders in the Irish market to follow suit. It is heartening to see variable rates move towards 3%, with AIB offering a rate of 2.75% for customers with a low loan to value ratio – the lowest rate I am aware of in the Irish market.

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"What the announcement shows is that banks can afford to cut rates and still achieve more than healthy profits. The onus now is on Bank of Ireland, Ulster Bank, Permanent TSB and KBC, to introduce further rate cuts if they don’t want to lose market share.

"In my view, banks should be forced to compete on rates rather than ‘cash back’ gimmicks that customers end up paying back several times over in the long run due to higher interest rates.

"There is a significant move in the Irish mortgage market towards fixed mortgage rates. This provides certainty for both the lender and the borrower and I would hope the market will move to provide even better long term fixed rates for customers. Mortgage customers now need to challenge their bank to give them a better rate or else be prepared to switch to another lender if this option is open to them."

(CD/MH)