Wednesday 20 November 2019

Mortgage payments for first-time buyers vary by €1,400

The difference in costs adds up to €1,400 a year when the most expensive and the cheapest lenders are compared.
The difference in costs adds up to €1,400 a year when the most expensive and the cheapest lenders are compared.

Charlie Weston Personal Finance Editor

FIRST-time buyers who can get a mortgage are being charged widely different interest rates, it has emerged.

The difference in costs adds up to €1,400 a year when the most expensive and the cheapest lenders are compared.

ICS Building Society, a subsidiary of Bank of Ireland, has emerged as the most expensive for new mortgages for first-time buyers.

Its rate of 4.8pc far exceeds that of AIB which charges 3.74pc.

ICS operates mainly through brokers and will often lend to new buyers when others, including its parent Bank of Ireland, turn down applicants, experts said.

Across the market as a whole, brokers report that up to four-fifths of mortgage applications are being turned down.

Revelation

The revelation of the higher rates comes as Permanent TSB said that from this week it would offer all new buyers a rate of 3.99pc for a year.

Up to now it had two different rates depending on the size of deposit the new buyers could provide. The new introductory rate rises to 4.34pc after a year.

Founder of the Askaboutmoney.com website Brendan Burgess said mortgage rates for new buyers had now risen to such an extent that banks were now making profits from funding first-time buyers.

Financial adviser Karl Deeter said new buyers could often only get a mortgage from expensive lenders like ICS.

The difference in the rates charged by cheapest lender AIB and dearest ICS for a €200,000 mortgage works out at €118 a month in repayments. Over a full year this amounts to €1,416.

AIB is increasing its standard variable rates from today. Its variable rate for new buyers will go up to between 3.5pc and 3.7pc. The higher rate is for those who have a deposit of less than 20pc of the value of the home they are buying.

Last Friday, Bank of Ireland and ICS hiked lending rates for new buyers by 0.5pc.

The moves by both "pillar" banks comes just two months after the ECB cut its rate to a record low of 0.75pc. And the ECB could cut rates again when it meets on Thursday.

Bank of Ireland and Ulster Bank are both charging 4.5pc for new buyers, while Haven, EBS and National Irish Bank charge 4.35pc, according Mr Deeter. KBC has a rate of 4.25pc.

However, the market is weak with just 3,225 mortgages issued in the three months to the end of June.

Irish Independent

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