At last, mortgage price war hits home with cheap offer

ONE of Ireland’s biggest banks yesterday upped the stakes i n the mortgage price war – cutting the minimum loan amount to qualify for its cheapest rate.

Ulster Bank’s 2.2% five-year fixed-rate deal is now available f or mortgages of € 250,000, reducing it from a previous minimum of €300,000.

The reduced loan amount means thousands more homeowners qualify for the rate. It comes after mortgage lender Avant Money entered the market with fixed rates as low as 1.95%

Karl Deeter, of Irish Mortgage Brokers, said: ‘It’s part of the mortgage war.’ He also said the trend in mortgage rates in Ireland is going to be downwards, adding: ‘Avant Card changed the landscape and you saw very quickly AIB responded and now Ulster Bank has responded.’

However, he said few mortgage holders do switch, so homeowners should start looking at rates on offer. He said the banks were not in ‘a race to the bottom’ but a ‘race to value’, but added that the real issue was that only ‘about 3%’ of homeowners switch their mortgage to better deals. He said: ‘We have 35,000 borrowers in this country who have walked past €30,000 in savings, according to the Central Bank, and over 100,000 borrowers who have walked past €10,000, which is €1billion in lost consumer spending. If you saw that amount in a carrier bag in the street you wouldn’t walk past it.’

Despite rates lowering among the larger banks, he does not believe many will match Avant’s 1.95% rate. He said: ‘Avant might be the best but their machine isn’t big enough and their processing isn’t fast enough for them to truly damage the larger banks, whereas if someone big does it...’

And Martina Hennessy, of online mortgage broker doddl.ie, said: ‘The reduced rates are a welcome announcement for consumers with the lowest rate on offer by Ulster Bank set at 2.2%. The introduction by Avant Money of a sub 2% rate in September has meant others have been viewing their products and pricing.

‘Competition in the market is always positive for the consumer. I would expect to see further announcements from some of the other mortgage lenders who have not reduced rates and continue to lend at fixed rates of 3%.’

Ulster Bank’s fixed rates allow for overpayment of up to 10% of loan outstanding each year during the fixed period, which means homeowners can reduce their mortgage with lump sums without incurring a penalty.

Overpaying a small amount each month can add up. A family with a mortgage balance of €250,000 repaid over 25 years on a rate of 2.2%, who overpay €100 per month, can cut the loan by over two-anda-half years and save interest payments of almost €8,800.

‘A welcome announcement’