EBS tar­gets mort­gages with 3% cash­back deal

The Irish Times - Business - - BUSINESS NEWS - FIONA RED­DAN

EBS build­ing so­ci­ety, a sub­sidiary of state-owned AIB, is push­ing for a greater share in the mort­gage mar­ket af­ter an­nounc­ing a cash­back deal of up to 3 per cent on its mort­gage prod­ucts, in a move which will put it on a level cash­back play­ing field with ri­val Bank of Ire­land.

Cash­backs have been crit­i­cised for ma­nip­u­lat­ing cus­tomers and cost­ing them more over the long run. EBS will now of­fer up to 3 per cent cash­back to cus­tomers tak­ing out new fixed or vari­able rate mort­gages on their homes in Ire­land, and the of­fer is avail­able to first-time buy­ers, cus­tomers mov­ing to a new home, and cus­tomers who wish to switch their mort­gage to EBS.

The move means that some­one with a €300,000 mort­gage, for ex­am­ple, will now get €9,000 back in cash, or €12,000 on a €400,000 mort­gage. The lender of­fers 2 per cent back once the mort­gage is drawn down, with a fur­ther 1 per cent avail­able af­ter five years. The of­fer is avail­able un­til the end of the year. Pre­vi­ously, EBS of­fered a cash­back of 2 per cent. How­ever, while a num­ber of other lenders, in­clud­ing Bank of Ire­land (up to 3 per cent) and Per­ma­nent TSB (2 per cent) con­tinue to of­fer cash­back deals, they have been crit­i­cised for com­pet­ing on in­cen­tives, rather than rates.

Higher rates

A re­cent study from re­searchers at Trin­ity Col­lege Dublin and In­de­con Eco­nomic Con­sul­tants, for ex­am­ple, found that a cash­back mort­gage could end up cost­ing bor­row­ers €30,000 more over the life of their mort­gage due to the higher rates quoted on such prod­ucts, while younger and less-ed­u­cated bor­row­ers were seen to be more at risk of choos­ing these more ex­pen­sive mort­gages.

This fol­lows re­search in 2017 by the Com­pe­ti­tion and Con­sumer Pro­tec­tion Com­mis­sion, which con­cluded that cash­back deals “rep­re­sent a so­phis­ti­cated at­tempt to ma­nip­u­late con­sumer be­hav­iour”. And last year, Fianna Fáil spokesman on fi­nance Michael Mc­Grath pro­posed an amend­ment to see if the prac­tice could be banned, as cus­tomers avail­ing of cash­backs can end up pay­ing far more over the long term.

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