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AIB and BoI under siege from rivals on home loans


Photo: Thinkstock

Photo: Thinkstock

Photo: Thinkstock

INTENSE competition among banks has caused AIB and Bank of Ireland to lose out to small players which are offering better mortgage deals.

Ulster Bank, KBC and Permanent TSB are chipping away at the dominance of the Big Two, according to stockbrokers Merrion Capital.

Analyst Ciaran Callaghan said the shortage of houses for sale and the cut-throat mortgage competition had resulted in the two pillar banks collectively losing 10pc of market share to their rivals.

He was commenting on revelations in the Irish Independent that a fresh mortgage war has broken out. New figures released yesterday from the Central Bank on what banks were charging for new mortgages were described as "nonsense".

The Central Bank said the average rate was 3.29pc in July for what it calls "new loan agreements to households for house purchase".

Mortgage experts said most new borrowers were paying more, making the market here highly profitable.

The Central Bank figure is an average of the rates first-time buyers are getting, and also includes ultra-low tracker rates, which are no longer available.

It emerged last month that the Central Bank counts older tracker mortgage rates that have had repayments restructured in its new mortgage rate.

The bank plans to release a new data series, excluding old trackers, by 2015.

Brendan Burgess of Askaboutmoney.com said the figures being produced by the Central Bank were inaccurate.

"That's an absolute disgrace. One month later, the Central Bank is still peddling this nonsense," he said.

The high mortgage rates in this market mean smaller lenders, such as KBC Bank, Ulster Bank and Permanent TSB, are able to nibble at the dominance of AIB and Bank of Ireland by offering discounted fixed rates, paying the cost of home insurance and offering to reimburse home valuations .

This has led to a situation where AIB and Bank of Ireland now collectively control 67pc of the new mortgage lending market, down from 77pc in 2012.

Mr Callaghan said: "The smaller players are taking a more aggressive approach to win new business."

Meanwhile, the Central Bank's figures show that personal loan rates offered by banks here average 7.54pc, compared with an average of 4.56pc in the Eurozone.

The average interest rate charged on personal overdrafts has gone up from 13.44pc to 14.3pc in the year to July.

During the same period, consumer loans of one to five years duration increased sharply - from 5.95pc to 8.01pc.

The cost of loans to businesses increased from 2.81pc to 3.29pc in this period, for loans of one to five years.

Lender is accused of bullying homeowners

A LEADING bank has been accused of bullying homeowners who are in mortgage arrears.

Permanent TSB has been criticised for continuing to pursue mortgage defaulters through the courts after the bank struck a deal with struggling householders on new repayments.

David Hall of the Irish Mortgage Holders Organisation claimed the bank was "bullying" these customers, who he said numbered up to 3,000.

He has written to the Central Bank claiming the bank is in breach of the code of conduct on mortgage arrears.

The code states that legal proceedings for repossessing a house must be put on hold "for the period during which the borrower adheres to the terms of the alternative repayment arrangement".

In a letter to the Central Bank Mr Hall gave details of a case he was dealing with where a homeowner had not been engaging with the bank.

But, following the involvement of the Irish Mortgage Holders Organisation, the homeowner had reached agreement on rescheduled payments, but was still forced to appear in court as the bank continuing to seek repossession.

Mr Hall said: "The bank is bullying people who engage with them."

Permanent TSB denied the claims.

"Permanent TSB does not continue to take legal action against defaulting borrowers after a deal has been put in place.

"However, in order to adjourn proceedings which have commenced, Permanent TSB is required to raise the matter in the courts on the next hearing date which may be after the new arrangement has been agreed.

"This is just the court procedure and does not mean that the bank is continuing the court action - merely waiting for the next available opportunity to have it adjourned."

Irish Independent