AIB announced today that they will be closed to switcher mortgage business effective immediately. We spoke to Mary Wilson from RTE’s Drivetime on the topic and we stated similar views to what you will read here.

The options open to a bank with limited liquidity are essentially ‘who do we lend to’, in terms of expanding credit or extending credit to where it may have a meaningful economic impact. Sadly (because I have to be honest, as a broker this really sucks for us) that means cutting out certain parts of the market such as switchers.

The rationale is that switchers already have the money, they are merely shopping around for a better price, first time buyers on the other hand, haven’t even gotten the money to buy a home with yet and if you have to choose between the two I think it is fair to say that AIB made the right decision. Their commitment to the state during their recapitalisation was to first time buyers, not refinancing applicants or people trading up.

This will reduce competition, it isn’t good for the market, but one of the hallmarks of 2010 will be a strategic reduction in services/products as well as an increase in the cost of the provision of same. We find ourselves repeating the same message again and again: do something about it now rather than waiting to see if you are affected in the future then feeling hard done by after the fact. People who took that advice in recent months have obtained favourable AIB fixed rates, those that didn’t are now locked out from them.