Thursday 5 December 2019

EBS ups ante by reducing fixed-term rates

Central Bank Deputy Governor Ed Sibley, Photo: Tony Gavin
Central Bank Deputy Governor Ed Sibley, Photo: Tony Gavin

Charlie Weston and Ellie Donnelly

Mortgage lender EBS has reduced its fixed mortgage rates for new and existing customers, upping the ante in the market.

It comes a day after deputy Central Bank governor Ed Sibley said Irish banks were charging their customers double the rates they need to in order to be profitable.

Mr Sibley's surprise intervention blew a hole in the banks' arguments that they have to put aside so much capital that they cannot reduce rates to eurozone levels.

Mortgage rates in this country are twice those charged on average in the eurozone.

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The deputy governor's intervention piles pressure on banks for more mortgage cuts.

His comments came a day ahead of EBS, which is part of the AIB Group, saying it was reducing all fixed rates, from one to five years, from 3pc to 2.9pc.

The lower rates apply to new, existing and switcher customers, and take effect immediately. However, if an existing customer is already on a fixed rate and wants to avail of the new lending rates an early breakage cost may apply.

EBS chief executive Des Fitzgerald said the new rate "coupled with the recent announcement that EBS have extended our back-in-cash offering until the end of 2020, represents significant value for mortgage customers looking for fixed rate certainty".

Earlier this year EBS increased the value of the cash it will give back to mortgage customers. The offer of up to 3pc back in cash is available to customers taking out fixed or variable rate mortgages.

Those eligible for the offer will receive €3,000 back for every €100,000 in new mortgage borrowing drawn down.

Banks here have been reducing rates over the last two years. The average rate in the market fell below 3pc in September. But recent falls were sharper in most other countries, widening the gap between Irish mortgage rates and the average across the eurozone.

This means typical new buyers here with a €300,000 mortgage over 30 years are paying €235 more a month than the average for the currency bloc.

This works out at €85,000 over the lifetime of the mortgage, according to calculations by Brokers Ireland.

Mr Sibley said he accepted the banks' argument that operating costs here are higher than the EU average, but he said these don't explain differing rates between new and older customers, which can add tens of thousands of euro to a typical home loan.

Irish Independent

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