Bank of Ireland and AIB now issuing three out of four mortgages amid calls for Government to intervene over ‘unhealthy lack of competition’

The exits of Ulster Bank and KBC Bank have left the two biggest banks – AIB and Bank of Ireland – with a dominant position in the home-loans market.

It comes after AIB said it issued one-in-three new mortgages last year.

Last week, Bank of Ireland said it now had a market share of 41pc of the existing mortgage market, with its share of new home loans understood to be similar.

This means the two big banks now control three-quarters of the mortgage market.

Michael Kilcoyne, chairman of the Consumers’ Association, called on the Government to intervene in the market, which he said was displaying an “unhealthy” lack of competition.

Former European Central Bank (ECB) president Mario Draghi described the Irish banking market as a “quasi-monopoly” in 2018.

Since then, both Ulster Bank and KBC have left the market.

Mr Kilcoyne said there was now an urgent need for the Government and the regulator, the Central Bank, to stimulate more competition in the market,

“When just two banks are issuing almost 75pc of new mortgages, they are in a position to set the pace, set interest rates. It shows an unhealthy lack of competition,” Mr Kilcoyne said.

“The Government and the Department of Finance should intervene in the market and subsidise a new bank to come in here, if that is what it takes.”

Davy Stockbrokers banking analyst Diarmaid Sheridan said: “AIB’s share of new mortgage lending is around 33pc, and Bank of Ireland’s share of new mortgages is around 40pc.”

He said PTSB had a mortgage market share of around 15pc to 16pc.

This means the three banks are issuing around nine out of 10 new mortgages.

AIB yesterday reported “exceptional” after-tax profits of €2.058bn for last year, up from €765m the previous year.

It said in its results presentation: “Mortgage market share was 33pc, reflecting a strong performance in a market characterised by lower switching levels when compared with the prior year. New mortgage lending in Ireland was €4bn.”

AIB chief executive Colin Hunt said the bank had issued 15,000 new mortgages last year.

Mr Hunt said: “We don’t explicitly target market share, but we are happy these numbers reflect our ability to execute in the market – there’s a big step between someone applying for a mortgage and drawing down.”

The bank’s stock of mortgages was boosted after it bought Ulster Bank’s tracker mortgages.

Bank of Ireland had a 28pc share of the stock of mortgages in the market in 2022 before it bought KBC Bank’s mortgage book.

Questioned about interest rate cuts for mortgage holders and increases for savers, Mr Hunt said the ECB had significantly increased interest rates “in terms of scale and pace” over the course of the last 18 months, and AIB had passed on about 40pc of the official rate increase to its mortgage customers.

Bank of Ireland boss Myles O’Grady said last week the bank had taken a “balanced approach” to higher mortgage rates. It had passed on increases in the region of 1.7 percentage points to mortgage customers but, on the other side of the book, it was now offering rates of up to 3pc on deposits.