Get your sums right on mortgages and never assume banks have your interests at heart

HOW do you find the best mortgage deal? Even as a broker we can find comparison tricky. How do you decide the best loan when you want a fixed rate but could then end up on a variable rate? Or what about cashback offers?

There are the many other terms that can impact you, so today we’ll look at this.

Variable rates can be compared on a straight ‘price -comparison’ basis. For a typical first-time buyer borrowing 90pc of the value of the home KBC, AIB/Haven and Ulsterbank all lend at 3.5pc but only AIB/Haven do it without condition — the others require you to open a bank account with them.

For lower sums (a less than 50pc loan) KBC and Ulster Bank are the best at 3pc. But again, you have to open an account to get that price. To do it without condition both Pepper and AIB will do the loan at 3.1pc.

Fixed rates are tricky because you have to consider the total cost and that means taking the variable rate and applying it after the fixed term expires. If you take a 25-year loan, it’s prudent to not only look at the cost of the first three years if you take a three-year fixed rate. What about the other 22?

This paints a different picture. Consider a three-year fixed rate on a loan of €250,000 over 25 years. Bank of Ireland offer a 3.2pc rate while KBC are at 3.1pc with an account, but after three years BOI have the highest variable rate in the market at 4.5pc — KBC’s variable is 3.5pc.

Prices can change, base rates can change and the best today may be the worst tomorrow. But we can only do calculations with the things we know so we’ll do that now.

When you look at the total cost of this loan over 25 years with Bank of Ireland, the total interest will be €155,462 — with KBC it would be €121,650. The difference is almost €34,000 which is still €29,000 more expensive, even when you factor in the 2pc cashback on offer.

Banks are not obliged to let you know who is better than them. This is a failure of financial regulation which claims to have the consumer at heart but which does little to encourage independent and impartial advice (which is what brokers give).

This is why something as simple as comparing two mortgages is not as straightforward as it ought to be.

It’s bread-and-butter analysis that even many financially astute people make mistakes on, so get some independent advice.

Whatever you do, don’t ever go direct to your bank thinking they have your best interests at heart.