Banks are now buying market share with cash
Published 08/01/2016 | 02:30
The Government may be trying to get us to cut down on our use of cash - but, as everyone knows, cash is king.
The last Budget cut the cost of using debit and credit cards and put a 12c fee on cash withdrawals in a bid to get us to pay electronically.
But when it comes to persuading people to do business with you, banks know that money talks.
That is why Permanent TSB has become the second bank to offer a cash lump sum to attract mortgage customers.
Bank of Ireland started the trend. It launched a cashback offer, then doubled it and extended the offer. It now offers €2,000 cash back for every €100,000 borrowed.
Customers flocked to the bank even though they would pay less over the life of their mortgage by opting for the likes of AIB or EBS, which have lower variable mortgage rates.
Now Permanent TSB has decided to join in with the same cashback offer. It is also offering a one-year discount on its mortgage rate for new residential borrowers.
The Central Bank lending rules on the sizes of deposits that borrowers need, and the amount they can borrow relative to their income, mean that the banks are competing hard for a shrinking number of mortgage borrowers.
Banks insist that, despite the new incentives, we are not witnessing a return to Celtic Tiger-type loose lending. The strict Central Bank lending rules will see to that, they argue.
But rather than offering incentives, many would prefer if banks did more to reduce their sky-high variable mortgage rates.