Beware banks bearing ‘gifts’ for home-buyers

IT’S a tempting offer. At a time when the finances are stretched as you undertake the biggest purchase of your life, a wad of cash is surely tempting. Most home-buyers are stretched to the limit when buying their first house and taking out a mortgage. Aside from the purchase price, there’s the deposit, the legal fees, the decorating and furnishing to think about.

Banks, including Bank of Ireland, Permanent TSB and EBS, offer cashback of 2pc of the value of the mortgage drawn down to switchers and first-time buyers.

Bank of Ireland will add another 1pc after five years for those who stay with it for five years and open a current account. Switchers to AIB and Haven get €2,000 in cash, KBC switchers get €3,000, Ulster Bank offers first-time buyers and switchers €1,500 in cash.

Bank of Ireland’s deal could see those home-owners getting €9,000 back on a €300,000 loan after five years. Money for nothing? Not quite.

Banks stand accused of using cashback incentives to camouflage their exorbitant mortgage rates and avoid cutting them. Now these cashback offers look set to be banned as a Fianna Fáil bill to prohibit the incentives could be law by the summer.

With mortgage rates well above European norms, the consumer deserves greater levels of protection.

Like an upmarket door-to-door money-lender, the short-term gain of the cashback will be repaid multiple times. Beware of banks bearing gifts.