Thursday 26 April 2018

How customers can get a cash 'reward' for paying the mortgage

Permanent TSB move is set to shake up lending market and force rivals to respond

Karl Deeter said the onus is now on other lenders to follow suit
Karl Deeter said the onus is now on other lenders to follow suit
Charlie Weston

Charlie Weston

Permanent TSB is set to shake up the mortgage market by offering new borrowers cash back every time they make a payment on their home loan.

The move will see 2pc of the value of the monthly repayment paid back in cash for those who also have a PTSB current account, the Irish Independent has learned.

This could see a family with a €300,000 mortgage get €360 back a year. Permanent is the first bank to offer such an incentive.

Now the pressure will be on other lenders to come up with a similar offer, in what could amount to a radical jolt for other banks.

Permanent is among banks that pay 2pc of the value of the mortgage back in cash when it is being taken out. It will continue to pay out the cash back when new mortgages are drawn down, in addition to offering cash to those who pay regularly.

The main condition for borrowers is that they must have their salary paid into the Explore current account with Permanent TSB.

The 2pc cash-back incentive means that a borrower with a €300,000 mortgage over 25 years would end up getting €30 a month back into their current account.

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Over a year, this works out at €360. This is based on monthly repayments of €1,500.

The cash back on monthly repayments is roughly equivalent to a cut in interest rates of 0.25pc.

Permanent said a new mortgage customer borrowing €300,000 could get €6,000 in cash back when they draw down the loan and €30 a month for making payments.

Mortgage broker Karl Deeter welcomed the initiative and called on other banks to do the same.

Mr Deeter, of Irish Mortgage Brokers, said: "Permanent TSB is the first bank to show some loyalty to its customers.

"It is saying, 'Pay your mortgage and we will give you something back.' Now, we need to see others doing the same."

The bank is hoping to boost its share of the mortgage market with the new offer.

It had market share of almost 11pc in the first half of this year. This is up from a low of 2pc during the height of the financial crisis.

The commercial director of Permanent TSB, Mark Coan, said it was the only bank to offer cash back to customers for paying their mortgage.

"Our groundbreaking Explore Account already gives great rewards every month to customers for choosing Permanent TSB for their current account. This gives them a huge incentive to choose Permanent TSB for their mortgage," he said.

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The new offer applies to residential mortgages only that are drawn down from Monday.

Last year Permanent TSB launched the Explore current account, which pays and rewards customers who use it. Customers are paid 10c by the bank for each time they use their Permanent TSB Visa debit card in-store or online up to a maximum of €5 a month.

The payment is made each month directly to the customer's current account.

Permanent TSB last month announced profits of €36m for the six months to June 30 this year, down 55pc year on year.

The lender, which remains weighed down by a high portion of non-performing loans, posted an underlying net profit of €53m, which beat consensus forecasts.

In total, the recovering lender recorded a 62pc increase in new mortgage lending while the wider market expanded by 35pc, underlining PTSB's relatively robust rate of growth.

Irish Independent

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