Tuesday 21 November 2017

Mortgage take-up rises as lenders to cut rates

Brendan Burgess Picture: Steve Humphreys
Brendan Burgess Picture: Steve Humphreys

Charlie Weston and Kevin Doyle

There has been a sharp rise in the number of mortgages drawn down by home buyers.

It comes as rival banks are now expected to respond to mortgage-rate cuts from KBC Bank, in a move that should benefit new buyers and existing borrowers.

More than 8,000 mortgages were issued in the July to September period, according to figures from the banks.

This is a rise of 20pc on the previous quarter.

The numbers switching mortgage have doubled to close to 700, although this is off a small base.

First-time buyers accounted for almost half of all mortgages drawn down during the quarter, the Banking and Payments Federation data showed.

Some 674 people switched their mortgage, doubling the number from the same three-month period last year.

More people have been approved by their lender to take out a mortgage, although these loans have not been drawn down yet.

Close to 3,400 mortgages were approved each month during the third quarter on average. Almost half of approved loans were for first-time buyers, with mover-purchasers accounting for a third of the total.

Meanwhile, a banking analyst said the cuts by KBC Bank would force a reduction of 0.25pc in variable rates from the other banks.

Investec's Philip O'Sullivan said the rate cut and political pressure will put it up to the other banks. The imminent entry to the market of new lender Frank Money will also force rate cuts, he said.

In a note to investors, he said: "We would expect the impact of both political pressure and rate cuts by the likes of KBC to feed through to similar 0.25pc cuts in lending rates by the rest of the major Irish mortgage providers during the fourth quarter, with downward pressure likely to remain on mortgage pricing during 2017, particularly with niche new entrants to the Irish market such as Frank Money expected to offer mortgage rates below 3pc."

He said that Permanent tsb and Bank of Ireland will continue to try to resist cutting their variable rates, but Bank of Ireland will be under intense pressure to reduce its mortgage rates.

KBC Bank is now offering a one-year fixed rate of 2.9pc for customers with a loan-to-value of less than 90pc.

The reduction in the variable rate depends on the value of the home relative to the size of the loan.

A customer with a loan-to-value of less than 50pc can now avail of a rate of 3pc with KBC, while a customer in the 80pc to 90pc loan-to-value bracket will now pay 3.5pc.

The new lower rates will not apply to existing borrowers who are in negative equity.

Brendan Burgess, of the Fair Mortgage Rates Campaign, welcomed the fact KBC has committed to treating existing customers the same as new customers.

Irish Independent

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