Mortgages

Are mortgage cashback offers good value?

Daragh Cassidy

Daragh Cassidy

Head of Communications

EBS has announced that it's extended its 2% cashback offer until 31st December 2019. But how does this compare to other cashback offers and are these popular deals actually good value in the first place?

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 mortgage, it’s essential to shop around to make sure you’re getting the best offer – and repayment rate – for your situation.

So who's offering how much cashback and until when?

AIB - €2,000 to switchers

AIB isn't offering cashback to first-time buyers. It is however offering €2,000 back 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's suggested that it be used to help pay for the legal fees associated with switching.

AIB currently has the lowest variable rate on the market at 3.15%, and is mainly relying on its comparatively low rates rather than cashback offers to attract new customers.

Bank of Ireland – up to 3% cashback

Bank of Ireland increased its mortgage cashback offer from 2% to 3% back in August 2016, 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 31st December 2018 and will receive a further 1% after year five of your mortgage. 

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

According to the Banking and Payments Federation Ireland the average first-time buyer mortgage is now around €220,000.

With Bank of Ireland’s 3% cashback offer, a first-time buyer drawing down a loan of this size could get €6,600 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, originally announced a 2% cashback offer in June 2016 and recently extended it until 31st December 2019.

The deal is available to first-time buyers, movers and switchers and, staying with our example of the average first-time buyer mortgage, allows new customers to get €4,400 back in cash.

KBC - €3,000 to switchers

KBC isn’t offering any cashback to first-time buyers at the moment but they are offering €3,000 cashback to switchers. Like AIB, they've focussed more on reducing their interest rates for first-time buyers as opposed to introducing cashback incentives.

Permanent TSB - 2% cashback

Just like EBS, Permanent TSB is offering 2% cashback to first-time buyers, movers and switchers who receive a mortgage offer before 31st December 2018.

Also, customers who make their mortgage repayments from the bank's Explore current account will receive 2% cashback on their monthly mortgage repayments every month until 2027.

Ulster Bank - €1,500 cashback

The bank is offering €1,500 cashback to first-time buyers, movers and switchers until 31st December 2018.

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 first-time buyer mortgage of €220,000, with an LTV of 90%, and let's assume a 30-year repayment term. 

Currently, one of Ireland’s leading banks is offering 2% cashback and is charging an interest rate of 3.70% for this type of mortgage, which equates to a monthly repayment of €1,012.62.

A first-time buyer will receive €4,400 back in cash upon drawdown and the cost of credit over the lifetime of the loan will be €144,543. Taking the €4,400 cashback away from the cost of credit gives a sum of €140,143.

Another bank, which isn’t offering any cashback to first-time buyers, has a rate of 3.15% for borrowers with an LTV of over 80%, which equates to a monthly repayment of €945.12. Total cost of credit over 30 years will be €120,243.

Therefore, in this example, taking 2% cashback in the short-term may end up costing you an extra €19,900 over the lifetime of the 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 to help with the decorating and furnishing. 

The key is to always consider the interest rate and overall cost of credit over the lifetime of the loan, as quite often the banks that offer the best cashback offers charge some of the highest interest rates.

You can easily compare rates and offers from all of Ireland's mortgage providers and see what the lifetime cost of credit will be for your specific requirements with our easy-to-use Mortgage Calculator.

Bank Cashback offer
AIB None available to first-time buyers, €2,000 to switchers
Bank of Ireland

Up to 3% cashback – available to current account holders only

2% cashback – non BOI current account holders

EBS 2% cashback – drawdown before 31st December 2019
KBC None available to first-time buyers, €3,000 to switchers
Permanent TSB

2% cashback – drawdown before 31st December 2018

2% cashback on monthly repayments – until 2027

Ulster Bank €1,500 cashback - drawdown before 31st December 2018

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