Sunday 11 December 2016

Mortgage war: rates slashed as banks fight for borrowers

Published 26/10/2016 | 02:30

(Stock picture)
(Stock picture)
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A new front has opened up in the mortgage price war, with KBC Bank cutting variable and fixed rates.

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The new rates will apply to both new and existing customers, and will see some paying as little as 2.9pc.

It comes as a new mortgage bill is being debated in an Oireachtas Committee, and after variable rates barely fell in the last year.

KBC is cutting rates by between 0.1pc and 0.6pc in a move that raises the competitive stakes in the mortgage market, the Irish Independent has learned.

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Click to view full size graphic

Existing customers will be able to get the same lower rates based on the equity they have in their homes.

The bank has been criticised in the past for restricting some rate cuts to new customers only.

The lender is not cutting its standard variable rate, which is 4.25pc.

But new borrowers, switchers and existing customers are being offered lower rates based on the value of the property in relation to the amount borrowed on it. This signals that KBC is moving away from offering different rates to new and existing customers.

KBC cut its rates for new and existing borrowers in May Photo: AFP
KBC cut its rates for new and existing borrowers in May Photo: AFP

The interest rate new and existing buyers get will depend on how large their deposit is, or how much equity they have in the home.

The bank said the changes would mean an existing customer with a €250,000 mortgage, with a loan-to-value of between 80pc and 90pc, could get a rate of 3.5pc.

If this customer opted for the one-year fixed rate of 2.9pc, repayments would fall by €170 a month. The new 2.9pc fixed rate for a year was the lowest in the market, KBC said.

It applies to those with loan-to-value of less than 90pc.

This is down from 4.25pc at present and will shave close to €100 a month off repayments.

Homeowners will have to submit a valuation from a valuer approved by the bank, and the lower rates include an extra discount for using the bank's current account.

The bank's variable rate for those with a loan-to-value of between 80pc and 90pc is coming down by 0.15pc to 3.5pc for new and existing customers.

New customer rates are coming down from next Tuesday, with existing customers of the bank able to apply for lower rates from December 1.

The latest move by KBC is expected to apply strong competitive pressure to larger rivals AIB and Bank of Ireland, while it will also force Ulster Bank and Permanent tsb to re-examine their rates.

About 300,000 homeowners are on variable rates, which are around 1.5pc higher here than in other eurozone countries.

KBC cut its rates for new and existing borrowers in May.

Eddie Dillon, director of product with the bank, said the bank wanted to reward loyalty by cutting rates for established customers.

"We are acknowledging and rewarding the loyalty of our existing customers while giving both home buyers and switchers a really compelling reason to move to KBC."

The bank has also opened up an offer of €2,000 towards professional fees to first-time buyers, switchers and movers. Up to now it applied only to switchers.

It has also extended its deal for 50pc off home-insurance costs for the first year until the end of this year.

KBC announced a new limited offer with the lowest personal loan rate of any bank on the market of over €10,000 at 6.3pc APR. This new personal loans rate is available until December 15 2016.

Variable rates have come down by 0.3pc to an average of 3.47pc in the past year, according to Central Bank figures.

But over the past two years variable rates have come down by more than 1pc, according to Brendan Burgess of the Fair Mortgage Rates Campaign, which has been calling for rate cuts over that period.

Bank of Ireland has not cut its variable rate, but it has produced a new range of lower fixed rates.

Mr Burgess said: "Bank of Ireland has not cut its variable rates, so many of its customers are still paying 4.5pc.

"Permanent tsb has not cut its SVR (standard variable rate), so many of its customers are still paying 4.5pc.

"Most lenders have cut mortgage rates, but only by a fraction more than their counterparts in other eurozone countries."

Investec Bank analyst Owen Callan said there was scope for banks to cut rates even further.

Irish Independent

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