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Which bank is offering the best mortgage cashback deal large

Are mortgage cashback offers good value?

Ulster Bank has extended its €1,500 mortgage cashback offer to December 31st 2017, but how does this compare to other cashback offers? And are these popular cashback deals actually good value in the first place?

This article is quite old, you might prefer our latest Mortgages pieces

The mortgage cashback craze was kicked off by Bank of Ireland back in June 2015 and now, all major lenders in Ireland are offering some form of cashback deal.

Whether you’re looking to buy your first home or to switch mortgages, it’s essential to shop around to make sure you’re getting the best offer – and repayment rate – for your situation.

AIB - €2,000 to switchers

AIB is the only bank that isn't offering cashback to first-time buyers. It is however offering €2,000 in cash if you switch your mortgage to the bank.

The cash will be transferred directly into your current account within two months of drawing down your loan and it is suggested that it is used to help pay for the legal fees associated with switching.

In May, AIB cut its standard variable rate to 3.4%, and is mainly relying on its comparatively-low rates rather than cashback offers to attract new customers.

Bank of Ireland – 3% cashback

Bank of Ireland increased its mortgage cashback offer from 2% to 3% in August, and it’s available to all first-time buyers, movers and switchers who have a current account with the bank. You’ll receive 2% cashback if you draw down a mortgage with the bank before March 31st 2017 and will receive a further 1% after year five of your mortgage. 

The 2% deal is still available to those who doesn’t have a current account.

The average Dublin house price is currently €383,000 and, from next year, first-time buyers will be permitted to borrow 90% of a property’s total value. So, €344,700 for an average-priced Dublin home.

With Bank of Ireland’s 3% cashback offer, a first-time buyer drawing down a loan of this size could get €10,341 back in cash.

Figures like this can look extremely appealing, but it’s essential to consider the lifetime cost of the loan before making a decision. More on that later.

EBS – 2% cashback

EBS, which is a subsidiary of AIB, announced a 2% cashback offer in June and recently extended its deadline to March 31st 2017.

The deal is available to first-time buyers, movers and switchers and, staying with our example of a first-time buyer purchasing an average-priced Dublin home at a 90% LTV, allows new customers to get €6,894 back in cash.

KBC - 2% cashback

Up until very recently, KBC was only offering cashback to switchers, but in October the bank announced that it would be offering 2% cashback to first-time buyers and movers who draw down a mortgage before the end of the year as well.

It’ll be interesting to see if KBC decides to extend its offer into 2017, particularly following the Central Bank’s changes to its mortgage lending rules.

Permanent TSB - 2% cashback

Just like EBS and KBC, Permanent TSB is offering 2% cashback to first-time buyers, movers and switchers.

The deadline for this deal is December 31st 2016 and the cash will be transferred into your current account within 20 working days of drawing down the loan.

Ulster Bank - €1,500 cashback

Ulster Bank made a bold move this week and extended the deadline for its cashback offer by a whole year, to December 31st 2017.

The bank is offering €1,500 cashback to first-time buyers, movers and switchers.

Approach cashback offers with caution

With rents at an all-time high and house prices continuing to rise, some cashback offers may look simply irresistible to prospective buyers who are busy saving up for a big deposit.

However, what may provide short-term financial relief may lead to long-term repayment pain.

Let’s return to our example of an average-priced Dublin home with an LTV of 90% and let's assume a 30-year repayment term. So, the total loan size is €344,700.

Currently, one of Ireland’s leading banks is offering 2% cashback and is charging an interest rate of 4.2% for this type of mortgage.

A first-time buyer will receive €6,894 back in cash upon drawdown and the cost of credit over the lifetime of the loan will be €256,441. Taking the €6,894 cashback away from the cost of credit gives a sum of €249,547.

Another bank, which isn’t offering any cashback to first-time buyers, has a rate of 3.50% for borrowers with an LTV of over 80%. At this rate, the cost of credit over 30 years will be €208,731.

Therefore, in this example, taking 2% cashback in the short-term may end up costing you an extra €40,816 over the lifetime of a loan!

Consider interest rates first, cashback offers second

While the above example may have you recoiling at the idea of taking any cashback offer, there is still something to be said for getting a large lump sum when buying a new home.

The key is to considering the interest rate and overall cost of credit over the lifetime of a loan first. This way, you can weed out some of the higher rates before getting distracted by eye-catching cashback offers.

Once you have found the best two or three rates for your situation, only then should you consider the cash that's on offer.

You can easily see what the lifetime cost of credit will be for your specific requirements on our Mortgage Calculator page.

Bank

Sign up cash offer

AIB

None available to first-time buyers, €2,000 to switchers

Bank of Ireland

3% cashback – available to current account holders only

EBS

2% cashback – drawdown before March 31st 2017

KBC

2% cashback – drawdown before December 31st 2016

Permanent TSB

2% cashback – drawdown before December 31st 2016

Ulster Bank

€1,500 cash - drawdown before December 31st 2017

Table 1: Cashback offers from Ireland's leading lenders

Bank

Variable rate*

5-year fixed rate*

AIB

3.50%

3.80%

Bank of Ireland

4.50%

3.55%

EBS

3.70%

3.80%

KBC**

3.70%

3.75%

Permanent TSB

4.20%

4.15%

Ulster Bank***

4.30%

3.75%

Table 2: Variable and fixed rates from Ireland's leading lenders

*Based on an LTV>80%, lower rates may be available for lower LTVs

**KBC current account holders can avail of a 3.50% variable rate

***Ulster Bank current account holders borrowing €350,000 or more can avail of a 3.50% variable rate up to an LTV of 90%


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