Thursday 23 November 2017

Pressure mounts on big banks as KBC cuts lending costs

Charlie Weston Personal Finance Editor

THE two biggest banks are set to come under pressure to lower mortgage rates for new buyers after one of their smaller rivals cut the cost of lending.

Expanding bank, KBC, has reduced its mortgage rates for new buyers by close to a quarter of a percent.

The move by the Belgian-owned bank is set to put pressure on its larger rivals, AIB and Bank of Ireland, to lower lending rates for first-time buyers.

It comes months after Permanent TSB cut its borrowing rates for new home buyers in an attempt to attract new business.

And more pressure is set to bear down on the larger banks with the revelations in this newspaper last month that South African-headquartered Investec Bank is to begin offering mortgages here from the end of this year.

The news of heightened competition in the home loans market comes after the European Central Bank left its key interest rate on hold, and its president Mario Draghi admitted that the bank's governors discussed a rate cut when they met yesterday.

Mr Draghi stressed again that rates will remain low for an extended period.

Most economists do not expect an ECB rate rise until 2015.

Juliet Tennent of Goodbody Stockbrokers said there was a slight chance of a cut in ECB rates if the tentative eurozone recovery falters.

A homeowner with a €200,000 tracker is now saving around €600 a year in repayments following two cuts in the ECB rate in the last year and a half.

And the fact that there is no risk of any rise in rates for at least a year will be good news for those in mortgage distress.

Half of those in arrears at banks, including Bank of Ireland, are on tracker rates, the Oireachtas Committee heard this week.

The move by KBC Bank to cut its lending costs for new buyers will see the rate for those who have a deposit of more than 20pc of the purchase price of the property being charged 3.99pc, down from 4.21pc previously.

Like other banks, KBC has ditched variable rates and has introduced loan-to-value rates for new buyers. These mean that lower interest is charged for those with bigger deposits.

The bank, which has been in Ireland for 40 years, said this week it was opening eight branches and launching a current account. It said in the summer it would no longer require borrowers to have a deposit of at least 20pc of the property's value – a 10pc deposit would be sufficient.

Irish Independent

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