Business Property & Mortgages

Tuesday 16 September 2014

Permanent TSB pours €350m into first-time mortgage loans

Charlie Weston and Donal O'Donovan

Published 07/01/2013 | 05:00

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BAILED-out lender Permanent TSB has announced plans to boost its consumer lending to €450m in 2013, a five-fold increase over last year's total.

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The bank said it has €350m available to lend for new mortgages, as well as €100m for car and other personal loans, plus €5m for new credit card finance.

The money is coming from €12bn that customers have on deposit with Permanent TSB. It has received €4bn in taxpayer bailouts.

The €350m in new mortgages could mean an extra 2,000 house sales, based on the typical €166,000 home loan advanced last year.

Fewer than 10,000 mortgage loans were issued in the first nine months of last year, according to the Irish Banking Federation.

Profitable

Permanent TSB's new home loans are being offered with an attractive introductory variable rate for new customers of 3.99pc. This rises to 4.33pc after a year, which is the average variable rate charged in the market.

New buyers need a deposit of 10pc of the value of the property. The new rates are less than many current home owners are paying, at least initially.

A spokesman for the bank said cheap introductory prices are not unusual, and will help boost its overall profitability. In time that will be better for all customers, because of the danger of prices rising if the bank is unprofitable.

The new lending includes offering mortgages as part of the NAMA deferred payment plan, where not all of the purchase price will have to be paid if the property falls in value over five years.

The bank is re-entering the car finance market – it sold its motor lending unit just months ago. Credit card lending is also to increase.

Interest rates from 9.1pc will apply to car loans, with higher rates for education and home improvement loans. But it is the move to re-enter the mortgage market that is set to grab most attention.

Only AIB and Bank of Ireland are lending to first-time buyers to any significant extent. KBC Bank is too but requires a deposit of at least 20pc of the value of the property. Former building society EBS, now part of AIB, is also ramping up its mortgage lending.

Permanent TSB issued virtually no new mortgages last year, and the year before as it grappled with high levels of arrears among residential and investor borrowers.

Homeowners will be hoping that the re-entry of Permanent TSB into the market will reinforce indications that mortgage lending is on the rise and that property prices have stabilised.

In the first half of last year there was a 10pc rise in the number of mortgages issued to first-time buyers. Some €1bn was advanced, with almost 6,000 loans issued. It was the first annual rise in mortgages draw-downs since 2006.

The Irish Banking Federation insists there has been a rise in applications.

Editorial comment: P28 Business

Irish Independent

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