Wednesday 21 August 2019

KBC becomes latest to cut mortgage rates in boost for borrowers

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David Chance

Belgian bank KBC has joined the growing ranks of those cutting mortgage rates in a move that will ease the burden on homeowners.

It comes at a time when house prices nationally have slowed, with falls in Dublin, while wages are rising - which should help with affordability and to meet the Central Bank's tough lending rules.

KBC cut its two and 10-year mortgage rates. For a two-year deal, interest rates run from 2.25pc to 2.3pc depending on the loan to value ratio, while for a 10-year deal, the range is 2.85pc to 3.2pc.

"We know that our customers are looking for greater value and certainty in their repayments over longer periods and our new pricing reflects these needs," said Fergal O'Riagain, KBC Bank's director of products.

That is a sharp turnaround in the sentiments expressed by the State's second-largest mortgage lender, Bank of Ireland, whose chief financial officer Andrew Keating said in February that he expected Irish mortgage interest rates to rise, even if the European Central Bank cuts interest rates, as it is expected to do in September.

Mr Keating said at the time that he believed the capital that banks needed to hold against mortgages meant that rates would rise.

Since then, however, lenders have cut, including Bank of Ireland which moved earlier this month and AIB, the largest mortgage lender.

Even after these cuts, Irish consumers will still be paying higher rates than any other eurozone country bar Greece.

The latest Central Bank data shows that the average interest rate on a new mortgage was 3.03pc in April, almost double the rates in France and Germany.

AIB and Bank of Ireland, the market leaders, have also cut rates.

Mortgage affordability has emerged as a major barrier for many first-time buyers and tough Central Bank rules mean that first-time buyers have to save, on average, for more than 15 years to be able to come up with a 10pc deposit.

Lending limits were introduced by the Central Bank in 2015. Under the rules banks and mortgage providers are limited to lending three-and-a-half times a buyer's income.

Taoiseach Leo Varadkar recently called on the Central Bank to loosen strict mortgage-lending rules to help young couples caught in the so-called 'rent trap'.

The tough rules here came in after a property crash and irresponsible lending that pushed the State to nationalise the banks. Some critics of these measures say they amount to shutting the stable door after the horse has bolted.

Irish Independent

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