Thursday 27 October 2016

Which sweetener offers best deal

Banks are offering a range of incentives to potential customers, says John Cradden, and first-time buyers are firmly in their crosshairs

Published 09/04/2015 | 02:30

Sarah Woods and Conor Vavasseur and their one-week-old boy, Bobby at their aparatment in Ranelagh.
Sarah Woods and Conor Vavasseur and their one-week-old boy, Bobby at their aparatment in Ranelagh.

If you're a first-time buyer, you would be forgiven for thinking that the banks are falling over themselves to give you a mortgage.

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Take out a mortgage with us, says Ulster Bank, and we'll give you €1,500 towards your legal conveyance fees.

No, come to us and we'll pay 1pc of the stamp duty on your mortgage, says Bank of Ireland.

Permanent TSB says: we'll give you €1,000 cash if you draw down your mortgage from us.

If you get a mortgage from us, says KBC, we'll pay half of the first year of your home insurance bill and give you 0.2pc per interest rate discount on a mortgage if you open a current account with us.

There's no question that lenders have first-time buyers firmly in their crosshairs as the mortgage market picks up after such a long period in the doldrums. These offers apply to FTBs in the main, but also to mortgage switchers.

Indeed, to anyone who was in the 'switcher' mortgage market nearly 10 years ago, these 'sweeteners' may induce a sense of déjà vu.

Back in 2006, during a period of rising interest rates, lenders were offering a range of incentives to homeowners to switch to their lower-rate mortgages, including paying up to €2,000 towards the legal fees associated with remortgaging along with fees for property valuations.

Farzaneh Moeini, mortgage expert at the Blackpool Mortgage Centre in Cork, says: "I believe there are some similarities between now and 2005 in that we can see a definite move back to lender's incentivising, but there are also some fundamental differences."

Most of the offers then were geared firmly at switchers in what was emerging as a hugely competitive market segment. "These borrowers were seeking lower rates, refinancing existing short-term loans, improving their homes or buying second homes."

"By comparison, in recent years lenders have been more focused on lending to first-time buyers."

While such offers reflect a more competitive marketplace and perhaps that banks are more willing to lend, experts point out that it shows just how limited they are in terms of lowering rates.

While few would suggest using these sweeteners to influence what mortgage provider you should go for, they are worth bearing in mind when comparing overall packages, says Simon Moynihan of price comparison site he rates the Ulster Bank's €1,500 legal fees offer as the best for mortgages of less than €150,000, the Bank of Ireland's 1pc stamp duty offer is better for mortgages higher than this amount, "simply because you'll get more cash". For example, Permanent TSB offers a 4.2pc variable interest rate on a 20-year, 90pc mortgage for a property worth €220,000 compared to the Ulster Bank's 4.3pc, meaning that an Ulster Bank customer will pay €2,535 more over the course of a 20-year €198,000 loan than a Permanent TSB customer.

Add the incentives (UB's €1,500 vs PTSB's €1,000) and the PTSB customer's edge reduces to over €2,000 than if he had gone with Ulster Bank.

With the same mortgages over a period of 35 years (again, assuming the rate stays the same), the Permanent TSB customer would be around €4,500 better off, (which includes taking into account the up-front incentives). "It's the interest rate that makes the big difference, so customers should shop for that first and look at the incentives second," said Mr Moynihan.

However, it's worth remembering that some of the incentives are only available for a short period. The Permanent TSB offer is due to run out shortly, while the Ulster Bank's one expires this June.

Mr Moeini adds that some of the most competitive rates are offered by lenders that don't offer any incentives. AIB, EBS, Haven (a division of AIB) are all currently offering five-year fixed rates of 3.9pc on 90pc LTV mortgages, along with Ulster Bank.

Even a 0.1 pc difference in rates can really add up depending on the length of the mortgage, so the KBC offer of a 0.2 pc discount makes its already competitive one, two or three-year fixed rate 90pc mortgages even more so.

All the same, Liam Ferguson of financial advisors Ferguson and Associates, urges buyers not to "let the incentive tail wage the long-term value dog". "There's no point in saving a few hundred or a thousand up-front if the mortgage is going to cost you multiples of this in higher repayments over the long term. Make sure that the interest rates and repayments are competitive before having your head turned by a sweetener.

"If you find that the rates and repayments for your particular requirement are competitive anyway and your lender is offering some short-term incentives, happy days."

The offers at a glance

Ulster bank

The €1,500 contribution toward the legal fees of those taking out a mortgage applies to both first-time buyers and mortgage holders switching from other banks. The deal will expire on June 13.

Bank of Ireland

The bank will pay stamp duty for first-time buyer customers to the value of 1pc of their mortgage. The offer was due to expire in 2014 but has been extended to December 31, 2015. Customers must have drawn down the mortgage before then to qualify. So, if your property is worth €200,000, you would be entitled to €2,000 towards your stamp duty.

Permanent TSB

Customers will get a cash back of €1,000 after the mortgage is drawn down if they open and maintain a Permanent TSB current account, mandate their salary into it and pay the mortgage out of it. The offer has been extended and now applies to those who draw down a mortgage before December 31 this year.


The bank will offer a discount of 0.2pc off any of their suite of interest rates if a customer opens and maintains a KBC current account, mandates their salary into it and pays the mortgage out of it. This 0.2pc reduction remains for as long as the current account remains open. It also offers six months' free home insurance if you take your home insurance with KBC's insurance department.

'We were looking for a year and had three collapsed sales...'

IT is all coming together for Sarah Woods and Conor Vavasseur.

The couple welcomed their son Bobby into the world just before St Patrick's Day.

The proud parents are busy getting used to caring for a tiny new baby.

As if that is not enough to deal with, they are just about to move out of their rented apartment into their own home.

The pair spent a year searching for a home to buy in South Dublin, an experience Ms Woods says was frustrating.

"We are delighted to be buying a house. We were looking for a year and had three collapsed sales. It was a hard year," she explains.

Some of those who beat them in the buying battle were older people who were trading down and didn't need a mortgage. Because they had sold their home and had funds, they tended to win out as they are prepared to pay the asking price.

Ms Woods is delighted they have finally found a home and are about to swap their rented apartment in Dublin's Ranelagh for a house in Churchtown that will need some work.

The mortgage was provided by Permanent TSB. The couple had tried a couple of banks but ended up going with Permanent TSB after a friend recommended them to the bank's Mullingar branch manager, Ronan Morgan.

They don't have any connection with Mullingar, but that was not a problem as Mr Morgan came to visit them.

"He came to us and he was really good and moved quickly," Ms Woods said.

The couple got mortgage approval before the Central Bank lending restrictions took effect. This meant they were able to get a mortgage with a 10pc deposit. They have a fixed rate at 4pc.

Mr Vavasseur is a stockbroker in Goodbody. Ms Woods works as a solicitor, with her work often involving conveyancing.

"This means I understand the stress behind buying a house," she says. But that is behind the family now, as a new baby and a new house is set to preoccupy them.

Irish Independent

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