There was some welcome news for KBC customers and anyone looking to lower their monthly mortgage repayments this morning. The bank has announced a range of cuts to its variable and fixed rates for new customers and, significantly, to its existing customers as well.
On top of this, KBC has made a €2,000 cashback offer available to first-time buyers, movers and buy-to-let customers. Previously, this had only been available to customers switching their mortgage to the bank.
Four of KBC’s variable rates have been cut, each by a margin of between 0.10% and 0.15%, depending on a customer's LTV.
To quickly explain LTV; it refers to the percentage of a property’s value that a customer is looking to borrow. For example, if someone is looking to buy a house for €200,000 and has a deposit of €20,000, he/she will need to borrow €180,000 to make the purchase. This means he/she has a deposit of 10% and an LTV of 90%.
Ok, moving on to the cuts.
Customers seeking a mortgage with a loan-to-value ratio of between 80% and 90%, which is the ratio most commonly sought by first-time buyers, will be able to avail of a rate of 3.50%, thanks to this morning's cuts. This is a reduction of 0.15% to its previous rate.
At the other end of the spectrum, customers with an LTV of less than 50% will now be able to get a rate of 3.00%, which is a cut of 0.10%.
It’s important to note that KBC current account holders can get a bonus discount of 0.20% on their mortgage rate, and this reduction has been factored in.
The new rates are effective as of November 1st for new customers and December 1st for existing customers.
KBC has reserved its biggest cuts for its fixed mortgage rates.
From November 1st a one-year fixed rate of 2.90% will be available to new customers with an LTV of under 90%, which is a cut of 0.40%.
By moving to this rate, customer who is currently paying a rate of 4.25% on a 20-year mortgage of €250,000 would save €174 a month in year one and over €25,000 over the lifetime of the loan.
The biggest rate cut of all – 0.60% - was made to KBC’s 5-year fixed rate for customers with an LTV of between 60% and 80%, taking the rate down to 3.05%.
In addition to its mortgage rate cuts, KBC has extended its €2,000 cashback offer – which was previously only available to switchers – to first-time buyers, movers and buy-to-let customers.
Cashback offers are becoming increasingly popular in Ireland, with all of Ireland’s leading lenders except for AIB now offering some form of cash incentive to first-time buyers.
Bank of Ireland is offering up to 3% cashback, EBS and Permanent TSB are offering 2% and Ulster Bank is offering €1,500. AIB is offering €2,000 cashback, but that's available to switchers only.
These offers are undoubtedly appealing, particularly to cash-strapped first-time buyers, but it is vital for all borrowers to consider the cost of credit over the lifetime of a loan. In some cases, early cashback can be quickly eaten up by high mortgage rates.
Our Communications Director, Simon Moynihan, welcomed the news of KBC’s mortgage cuts this morning; “It is good to see KBC cutting its mortgage rates for existing customers, as well as new customers. It shows that the bank is rewarding loyalty and taking steps to keep its customers happy and on competitive rates.
“It will be interesting to see how other banks react to this morning’s announcements from KBC. The last time a bank made big cuts to a range of rates, it prompted other banks to respond, which ultimately benefitted customers. And with Ireland's variable rates still higher than the EU average, there remains room for more cuts across the market".
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