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In June, EBS became the third Irish bank to offer cashback to new mortgage customers, following similar offers from Bank of Ireland and Permanent TSB.
And now, the bank has extended its offer until March 31st, which will be welcome news to many of Ireland's prospective first-time buyers.
With rents at an all-time high and banks requiring substantial deposits, it is particularly challenging for Ireland's first-time buyers to get on the property ladder these days. And this makes upfront cash offers very appealing to many.
EBS’s 2% cashback offer rewards customers with €2,000 in cash for every €100,000 borrowed, meaning that customers who draw down €250,000 will receive €5,000 in cash, and those who draw down €400,000 will get €8,000.
Interestingly, there is no minimum amount of time with which a customer must stay with the bank in order to avail of the cashback, which is not the norm with similar offers in the present market.
Bank of Ireland became the first bank to introduce a 2% cashback offer to new mortgage customers in June 2015 and, based on its success, decided to extend its offer until March 31st. What's more, the bank is now offering an additional 1% cashback to customers when they enter the fifth year of their mortgage.
Permanent TSB began offering cashback in January 2016, announcing a 2% offer of its own. The offer is set to expire on December 31st this year.
AIB, KBC and Ulster Bank have resisted percentage cashback offers with their mortgages, instead opting for lump sum incentives for customers who switch mortgages. AIB and KBC currently offer €2,000 in cash to those who switch, and Ulster Bank offers €1,500.
On July 1st, EBS’s parent company, AIB, will cut its standard variable rate to 3.4%, however, EBS has not announced a rate cut of its own at this time.
The bank’s standard variable rate will remain at 3.70%, with a rate of 3.30% available to customers with a loan-to-value ratio (LTV) of under 50%, and a rate of 3.50% available to those with an LTV of between 50% and 80%.
Under the Central Bank’s lending rules, the LTV for first time buyers is 90% up to a limit of €220,000, and 80% anything above that amount. That means that first-time buyers must provide a deposit of 10% of the property’s value up to €220,000 and €20% thereafter.
For non-first-time buyers, LTV is set at 80%, meaning a 20% deposit is required.
As part of EBS’ extension announcement, the bank’s CEO Des Fitzgerald said that “this back in cash offer has been very well received since we launched it in June this year, especially among first-time buyers who have a strong appetite for cash offers”. While this may be the case, other research has shown that Irish people have an alarmingly poor understanding of mortgages and often overvalue cashback offers.
In fact, 44% of those surveyed on their mortgage literacy were inaccurate at judging whether a cashback offer represented better value over the lifetime of a loan than a lower repayment rate.
With this in mind, customers should always calculate what their repayments will cost over the full duration of a mortgage when choosing a bank. The bonkers.ie Mortgage Calculator can help customers find the best option currently available in the busy marketplace.
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