DUBLIN (Reuters) - Allied Irish Banks (I:ALBK) cut its mortgage rate by 0.25 percentage points on Thursday, bucking a trend of lenders not passing on rate cuts as the country's housing market heats up.
The country's main lenders have been widely criticized in the media in recent months for not passing on cuts in European Central Bank interest rates to consumers.
AIB's standard variable rate mortgage is to fall to 4.15 percent from 4.4 percent, compared to the ECB's benchmark refinancing rate of 0.05 percent.
Merrion Capital analyst Ciaran Callaghan said the cut was likely to cost the bank 40 million euros, or a fall of around 0.04 percentage points in the bank's net interest margin.
But with residential property prices in Ireland up 15 percent in the past year, he said an increasingly competitive mortgage lending market explained the move.
"Competition has intensified across the Irish mortgage market in recent months, with lenders once again focussing on pricing to defend market share or chase volume growth," Callaghan said.
Ireland's main lenders are still dealing with bad loans made before the property market bubble burst in 2008. The government has said it would like to sell a portion of its 99 percent shareholding in AIB next year.
(Reporting by Conor Humphries; Editing by Greg Mahlich)