Rival banks may offer mortgage cash back
Published 09/01/2016 | 02:30
Rival banks may be forced to offer cash incentives to get new home buyers and switchers to opt for them for mortgages.
It follows the move by Permanent TSB to match the cash-back offer for mortgage customers being offered by Bank of Ireland.
Both banks will pay 2pc of the value of a mortgage to new customers, in a move that will mean a €2,000 lump sum for every €100,000 borrowed.
The move is expected to inject new life into the mortgage switcher market. People moving a mortgage to a new bank are exempt from Central Bank deposit and income multiple lending limits.
Chairman of the mortgage committee of the Irish Brokers Association Michael Dowling said that the other lenders will be reluctant to offer a cash-back incentive, but may have no choice.
He said the fact that two lenders were offering cash back would ramp up the pressure on AIB/EBS, Ulster Bank and KBC.
"The other lenders will be forced to respond even though they will be very reluctant to offer a cash-back scheme. It puts them under pressure and they will have to look at it," Mr Dowling said.
In addition, the bank will reduce its variable rate for new buyers and switchers by 0.5pc for a year.
The move by Permanent TSB is seen as an attempt to shore up its mortgage market share as the Central Bank lending restrictions have dampened down demand for mortgages from first-time buyers.
Banks contacted said they would keep their mortgage offerings under review.
New Central Bank governor Philip Lane recommitted the regulator to reviewing the restrictions once they are a year in operation.