AIB is expected to announce today that it will waive fees on accounts from which a mortgage is paid by direct debit.

The bank has cut rates on three occasion in the past ten months in an effort to lure mortgage customers, the latest of which comes into effect on October 1.

It is understood the fees waiver will start immediately for new home mortgage drawdowns and will be available to existing eligible home mortgage customers from December.

The benefit will be automatically applied to the personal current account used for the mortgage repayment.

AIB was one of the few banks here to respond to Michael Noonan's July 1 deadline to reduce standard variable mortgage rates for existing customers.

The Minister indicated that he would deal with the issue in the Budget if the banks failed to respond to his demand.

It is understood Mr Noonan will meet again with representatives of all the main banks in advance of the Budget to discuss mortgage interest rates.