Two Banks Just Cut Variable Rates - is the Mortgage Market Heating Up?
Mark Whelan
Staff Writer

This week, KBC and Ulster Bank both cut their variable interest rates, suggesting that the Irish mortgage market could be heating up again. We take a close look at the rate reductions and consider what they mean for Irish consumers looking to buy property, move house or switch mortgages.

This week, we waved farewell to a legend of Irish cinema, Maureen O’Hara, as she decided to pack up, sell her West Cork home and head for the US.

While we all can’t afford to sell our homes for a third less than the asking price as Maureen did, it seems that an increasing number of people are on the lookout for new homes in Ireland.

We took a look under the bonnet this week and found that visits to our mortgage comparison and switching pages have increased by a whopping 62% between Q2 in 2014 and the same period in 2015. Wow!

If that isn’t evidence enough of a resurgent mortgage market, this week’s variable rate cuts by KBC and Ulster Bank strongly suggest that the market is gradually gathering momentum.

Let’s look at the rate cuts and consider what it means for you if you’re considering buying, moving or switching mortgages in the near future.

KBC cuts rates for new customers only

On Wednesday, KBC Bank announced that it was cutting its variable rates by 0.20% for new customers. And for new customers only.

From September 15th, variable rates on mortgages with a 50% loan-to-value (LTV) ratio will be cut from 3.7% to 3.45%, while higher-risk mortgages with a 90% LTV will see rates drop from 4.1% to 3.85%.

And if you’re a KBC current account customer, you could get a further 0.20% off your rate, bringing the figure down to a potential low of 3.25%, which is one of the best rates on the market right now.

The folks at KBC claim that their rate reductions will save borrowers over €16,000 on a 20-year mortgage that’s worth €300,000. See, those small percentages can really add up!

Visit our Compare Mortgages page now

Ulster Bank cuts rates for new and existing customers

Hot on the heels of KBC’s announcement, Ulster Bank has cut rates by up to 0.30% too. And this time there’s a reduced rate for existing customers too.

For mortgages with a LTV of 60%, new and existing Ulster Bank customers will get a new reduced rate of 3.5%, effective immediately.

Customers with an LTV of 80% will see their rates reduced to 3.7%.

And there’s even a rate of 3.2% available to borrowers who are taking out a loan of at least €250,000, have an LTV ratio of 80% or less and have an Ulster Bank current account.

Ulster Bank is reacting strongly to the discovery that there has been a 56% growth in the number of people buying new homes and seeking the best available rates this year.

Visit our Compare Mortgages page now

What does it all mean?

It means that things are changing.

In isolation, excited announcements about cuts of 0.20% and 0.30% might not sound particularly headline-worthy, but when these cuts are creating new market-leading rates, it’s time to sit up and take notice.

In May, Michael Noonan demanded that banks reduce their variable rates, and he’s scheduled to meet them all again before next month’s budget.

So, the cuts from KBC and Ulster Bank could be a case of wanting to be the ‘best child in the class’ at that meeting, or it could be evidence of a property market that’s slowly but surely building up a head of steam.

Have you considered switching?

While these new rate reductions from KBC and Ulster Bank will put pressure on other lenders to do likewise, the most powerful way to increase competition in the market is for borrowers to actively seek better rates. And this can be done by either asking your existing bank for a rate reduction, or by switching to a new lender.

KBC will give you €2,000 to cover the legal fees associated with switching, while Ulster Bank is offering €1,500 for the same purpose.

Dave Curry of the Irish Mortgage Corporation said, "the mortgage lending market is more competitive now than it has been for many years. But it has also become much stricter, and more complicated and confusing. Mortgage holders and those looking for a new mortgage would be well advised to shop around for the best deal”.

Rates are falling, banks are lending and now could be a good time to take advantage of a newly-competitive market.