BoI forced to offer new 3pc cash-back loan deal
Bank of Ireland has been forced to bring in a new, higher cash-back deal for mortgage customers.
It is adding a loyalty payment to its original cash lump-sum offer to stop customers moving to another lender inside five years.
This will effectively increase its original cash-back offer from 2pc to 3pc.
Bank of Ireland was the first to offer cash-back for buyers, a move that has seen it hoover up mortgage business.
Its original offer gives mortgage customers 2pc of the value of the mortgage. This means new customers get a €4,000 lump sum on a €200,000 mortgage.
Permanent TSB and EBS later introduced similar deals.
However, Bank of Ireland had a condition attached to its deal allowing it to claw back the cash if the mortgage holder paid off, or switched, the mortgage within five years of draw down.
But the bank has been forced to drop the claw-back threat after this was banned under an EU directive that was introduced this year.
Bank of Ireland has reacted to this by introducing a new cash-back offer with an added loyalty payment after five years.
This is a bid to stop mortgage customers availing of the lump sum payment and then moving to a new lender.
Under the new Cashback Plus deal, Bank of Ireland is offering a 2pc cash lump sum, but adding an extra 1pc cash amount after five years.
The loyalty payment only applies to those who have a current account with the bank.
The old 2pc cash-back offer is still in place for those who do not have a current account with the bank. It also applies to investors and those taking out an equity release product.
But the new incentive is to ensure the bank builds up its current account customer base, and keeps mortgage customers for at least five years.
The 1pc loyalty payment is worth €1,000 on every €100,000 borrowed. A cash-back offer of 3pc on a €200,000 mortgage works out at €6,000.
Asked about dropping the claw-back condition in the original cash offer, Bank of Ireland said: "In March 2016, in line with the new Mortgage Credit Directive, the terms and conditions were updated and there has been no claw-back clause in place since then."
Bank of Ireland's variable rate is 4.5pc, one of highest in the market. The bank has not reduced this despite relentless political pressure. It has instead cut its fixed rates.