MAKING CENTS: Focus on the rate when shopping for a mortgage

NOW is a good time to be in the market for a mortgage in Ireland, writes Gráinne McGuinness

Irish banks are looking for business and are offering improved rates and a range of incentives to get it.

Whether you are a first-time buyer (FTB) or a mover, the key thing to look for should always be the interest rate. Your mortgage is likely to be the biggest household outgoing for many years of your life, so minimizing how much you pay each month should be your primary focus when choosing provider.

At the moment, variable rates for people looking to borrow at least 80% of the value of the property range from 3.7 to 4.5%. The 3.7% rate is offered by EBS, followed by AIB and Haven (an AIB subsidiary) who are offering 3.75%. KBC offer 3.85%, but will sweeten the deal for customers who have a current account with them. KBC current account holders get the rate discounted by .2% bringing it down to a market-leading 3.65%.

Another question to consider is whether to take a fixed rate or stick with variable. Customers on Standard Variable Rates (SVR) over the last few years suffered for being at the whim of their provider and paying cripplingly high monthly repayments to offset the losses banks were suffering on tracker mortgages. So it is tempting to fix your interest rate so as to know exactly how much your repayment will be.

But many market watchers believe interest rates are set to fall, in which case your fixed rate would prevent you taking advantage of the savings.

If you are interested in a fixed rate, AIB, EBS and Haven all offer 3.5% for one year fixed, up to 3.8% for five years fixed. If you are interested in long-term fixing options, Ulster Bank offer a seven-year fixed rate of 3.99%. Bank of Ireland go even longer, offering a 10-year fixed rate of 4.4%.

All the above rates are based on a FTB borrowing €220,000 for a property worth €250,000. If you want to look at various options Irish comparison site www.bonkers.ie have a very useful mortgage comparison tool. You can specify whether you are a FTB, switcher or mover and also input the property value and mortgage required. The Competition and Consumer Protection Commission (CCPC) also have one on their website consumerhelp.ie.

To sweeten the deal, various banks are offering other incentives to persuade you to give them your business. The most common of these is cashback, where your provider gives you a percentage of your mortgage back in cash.

Currently, both Bank of Ireland and Permanent TSB are offering 2% cash back on their mortgages. Ulster Bank is taking a slightly different tack and offering customers €1,500 towards their legal fees.

In each of these cases, the money is paid into the customer’s current account after the mortgage is drawn down. Moving into a new home is undoubtedly an expensive time, with unexpected extra costs around every corner. But any cash back will be a paltry amount compared to what you will reply in interest over the years, so keep rate front and centre when making your decision.

Permanent TSB are also offering increased flexibility as an incentive with their 3 in1 mortgage. They are offering a discounted rate for one year to customers with an LTV of 80% or less in addition to their cash back offer.

The third element of the 3 in 1 offer is flexible payment options. The bank offers customers opportunities to make flexible payment options, giving them the chance to take a payment holiday around expensive times such as Christmas.

They also offer overpayment options, allowing customers to clear their mortgage sooner than originally planned, either with lump-sum payments or increases to their regular repayments.

Find out more about the various options and products available at either of the comparison websites named above.

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