AIB and EBS eye home loan 'switching' market
Published 09/02/2014 | 02:30
HARD-PRESSED homeowners could get a welcome boost if the State's biggest bank decides to lure mortgage holders from other institutions.
AIB, and its subsidiary EBS, are now considering entering the "home loan switching market'', the Sunday Independent has learnt.
It follows an announcement that KBC Bank will become the first financial institution in five years to re-introduce mortgage switching.
As part of the battle to attract new customers, the Belgian-owned bank will pay €1,000 towards the legal costs incurred by homeowners who want to move to their bank.
It will also pay for a year's home insurance as part of the deal. If AIB enters the switching market, it will also have to come up with an incentive package to attract mortgage holders from other institutions.
Overall this is good news for homeowners, but experts warn customers need to be careful when moving their mortgage from one bank to another.
Of particular concern is that they could lose highly prized tracker mortgages where the repayment figure is tied to a historically low ECB rate.
"Customers should be aware that switching on to a variable rate leaves you open to the mercy of the banks if they decide to change the rates.
"But if somebody has a tracker, there would be no reason at all for them to switch," said Kevin McNerney, a broker with First Rate Financial Planning in Dublin 15.
But he says that overall the return of the lending agencies to try and persuade homeowners to switch mortgages is a further sign of recovery in the overall property market.
"It's significant in the sense that it shows the banks are trying to become competitive and fight for market share.
"AIB had been the first to come out in more recent years to publicly say that they were not open to switcher business," he said.
"It shows that the banks are happy in terms of the values in the property market."
In a statement an AIB spokeswoman said: "We currently do not accept switcher mortgages, as we are focused on providing finance for property transactions.''
But she added: "We are keeping this policy under review in light of market developments."
The spokeswoman could not say when the bank will make a final decision on the matter.
"It's premature to talk about any details – I don't think we should at this stage if we haven't announced it," she added.
During the boom years banks competed with each other to try and entice customers to move their mortgage loans, but the downturn meant the switcher market died.
KBC's new switcher policy will only apply to those whose homes are worth more than the total of their current mortgage.
This will rule out the estimated 50 per cent of mortgage holders deemed to be in negative equity.