First Active has cut the interest rate on its current account mortgage by 0.2 percentage points, making the mortgage product the most competitive variable rate available on the market.
The current account mortgage now has a variable rate of 3.29 per cent, shading AIB's standard variable rate of 3.3 per cent.
The drop, effective from Monday, also widens the gap in price between the current account mortgage and First Active's standard variable rate, which stands at 3.53 per cent.
First Active, the only lender selling current account mortgages in Ireland, said it had issued €300 million in loan offers and seen over €100 million in new lending drawn down since the product's launch in February.
Current account mortgages combine a current account with a mortgage, allowing money in the day-to-day bank account to reduce the balance of the mortgage on a daily basis, saving on the mortgage interest payable and potentially reducing the term of the mortgage.
Mr Brendan O'Hora, head of marketing at First Active, said there was pent-up demand for the product from customers, leading to over 7,000 calls requesting information.
It is thought that the number of current account mortgage customers is somewhere between 800 and 1,000. Mr O'Hora said this was a substantial number in the context of an approximate total of about 12,000 loans the lender issues a year.
He said it was "a very, very strong performance" for what was originally considered a niche product that had initially slow adoption rates when introduced in the US, Australia and the UK.
The lender said over half of current account customers were new to First Active, with the majority - over 30 per cent of the total - having switched their mortgages from other lenders.
