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Beware banks promising improved mortgage deals

With little movement on interest rates, banks are offering other sweeteners

Yes, Irish mortgage rates are still considerably out of whack with our European peers. For example, you can get a 20-year fixed rate in France for just 2.7 per cent, according to French Private Finance; or a tracker mortgage at 1.9 per cent above the ECB rate for 20 years. The best – in fact the only – long-term fixed rate in Ireland is from Bank of Ireland, and it’s 4.4 per cent.

However, banks are looking to incentivise their customers in other ways, and in doing so, gain a greater share of the mortgage market as it rumbles slowly back into life. But, if you are in the market to switch your mortgage to get a better deal, trading up or are looking to purchase your first home, what do you need to know about the current slew of offers?

The cash backs When it comes to cash back, BOI looks to be top of the heap, promising 2 per cent of your mortgage back in cash. So for example, that if you buy a house for €220,000, you will have a mortgage of €198,000, based on the new Central Bank lending rules. So, your cash back will be €3,960 – enough to cover the cost of your €2,000 stamp duty, as well as the cost of your legal fees. And you might even have enough left over for a trip to Ikea.

But remember, as always, to read the small print. For example, you can’t use the BOI deal as a way to circumvent the new Central Bank lending rules by coming up with a smaller deposit, as the mortgage has to be drawn down before you can access it.

If you’re looking to switch, KBC Bank will give you €1,000 towards your legal fees if you make the move by year-end, while Ulster Bank will give €1,500 towards the cost of legal fees, after mortgage drawdown, until September 11th, and Permanent TSB will give you €1,000

“Any lending institution should be looking for the individual to have the money upfront; they shouldn’t be using it (the cashback) to reduce their deposit,” says Ken Murray, director at the Association of Expert Mortgage Advisers.

And with the deal from BOI for example, if you repay your mortgage within five years, you may have to repay the €3,960. While you might think this is unlikely, such a position would arrive if you looked to switch your mortgage, so the cash-back is in effect tying you to the bank to a certain extent. KBC Bank also says it may seek to claw back its €1,000 legal fees offer if the mortgage is redeemed within three years.

To get the deal with PTSB, which expires at year-end, you must open a current account that has at least €1,500 paid into it within five weeks of drawing your mortgage, and your mortgage repayment must come from this account.

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