‘Exploitative’ mortgage cashback deals to be banned

Bill will force banks to offer better rates instead of 2pc cash incentive

MORTGAGE cashback offers look set to be banned in a move that would hit first-time buyers and switchers hard.

Banks have been accused of using cashback incentive to camouflage their exorbitant mortgage rates.

Now, a Fianna Fáil bill that will ban the practice of banks offering cash incentives to first-time buyers and movers could be law by the summer.

The Central Bank and the Competition and Consumer Protection Commission are also both opposed to cashback offers, as they see them as a device by banks to avoid cutting interest rates.

Mortgage rates in this country are a multiple of those in the rest of the eurozone.

The Department of Finance said it was considering research on cashback deals from regulators, which states the incentives have the potential to “exploit consumer biases”.

Last summer, the Competition and Consumer Protection Commission (CCPC) described cashback incentives as exploitative and said they offered short-term gain, but were not in consumers’ long-term interests.

A spokesperson for the Department of Finance said: “The CCPC report is currently under consideration by this department and other relevant departments, bodies and the Central Bank.”

It said the CCPC report highlighted that the offers and their marketing are potentially exploitative of consumer biases – and may result in consumers making short-term gains that over the medium or long term are not in their best interest.

The Central Bank recently sought feedback on whether to ban cashback offers and is considering the responses.

Fianna Fáil finance spokesman Michael McGrath is amending his Central Bank (Variable Rate Mortgages) Bill to ban cashback deals for three years.

The bill will no longer give control to the Central Bank to lower mortgage rates, but will now be amended to ban