The launch of the product marks a slight change in strategy for the bank but cashback will still be available on its other mortgage products for now.
Mortgage cashback offers have proved controversial since they were launched by Bank of Ireland (BOI) back in 2015.
Although the often sizeable sums of cash that they can offer first-time buyers, movers and switches are nothing to be sniffed at, opponants argue that they have led to consumers being charged higher interest rates.
Although the reasons for Ireland’s high mortgage rates are varied, some have argued that if the banks focussed on cutting their rates instead of offering cashback, homeowners would be better off in the long run.
The opinion at bonkers.ie has always been that there’s nothing wrong with cashback offers per se - the thing is to not get blindsided by them and to always consider the overall cost of credit over the term of your mortgage. If you don't need the cashback in the first place, then you're usually best to go with the lender who's got the lowest rate.
However, some first-time buyers in particular clearly need the cash that these offers provide, so banning them entirely, as some politicians have argued, seems unfair.
Surely a better solution would be for banks to start offering customers a wider choice of mortgage products - some which come with cashback upfront for those who need it but a slightly higher interest rate, and some which compete on interest rate alone?
Well it seems like the folks at Permanent TSB (PTSB) have thought the same as the lender has introduced its lowest interest rate to date for new customers, which is focussing on just interest rates.
Permanent TSB has introduced its lowest rate; a new four-year fixed rate of just 2.25% for first-time buyers, home movers and switchers.
4 Year Fixed Home Loan New Business
4 Year Fixed Home Loan New Business
- Available to new customers
The rate is available for those with at least a 20% deposit - or in other words a loan-to-value (LTV) ratio of at least 80% - and who are borrowing at least €250,000.
This makes PTSB one of the cheapest lenders right now for those with this size of a deposit, just behind AIB's five-year fixed rate of 2.15% and Avant Money on 2.20% - though for AIB you must be buying a home with a BER of at least B3 or higher.
Avant also has a rate of just 1.95% for those with a deposit of 40% (easier said than done unfortunately).
For those with only a 10% deposit, or an LTV of greater than 80% but below 90%, the rate is 2.55% (and again you must be borrowing at least €250,000).
Previously the lowest rate from PTSB had been its three-year fixed rate of 2.50%.
However no cashback upon drawdown will be available with these new four-year rates.
Cashback is still available on all PTSB’s other mortgage products, which is 2% of the value of the mortgage. And there’s no sign from PTSB that it’s going to withdraw this anytime soon - but clearly it has felt the need to compete with lower rates.
Laura Temple, head of lending products with the bank, said the introduction of the new option is to “broaden the choice available for customers”.
Our cashback mortgage offering is extremely popular with customers, but there are some who would prefer to choose a lower rate with no cashback option and this product is designed with them in mind.
Can existing customers apply?
Unfortunately these new rates are only available to brand new customers. Unlike other lenders, PTSB has been slow to offer its existing customers lower rates, even if they’ve come to the end of their fixed rate.
At the moment, the best an existing customer can get is 2.95%.
Will others follow?
PTSB, BOI, EBS, Ulster Bank and KBC all offer first-time buyers, movers and switchers some form of cashback, while AIB also offers switchers €2,000.
It will be interesting to see if BOI in particular, whose rates are quite high, follows PTSB's lead. Conversely, might AIB introduce a cashback deal for first-time buyers but charge a slightly higher rate?
Whatever happens, more choice and flexibility for mortgage holders can only be a good thing.