ICS Mortgages cuts its fixed and variable rates - East Coast FM
Competition in the mortgage market is undoubtedly heating up, with a number of lenders announcing new lower interest rates in recent weeks.
This week ICS Mortgages announced cuts of up to 0.50% to its variable and fixed-rate mortgages and has now become only the second lender in Ireland to offer a mortgage rate below 2%.
EBS has also recently cut its three and five-year fixed rates by 0.15% to 2.75%, while Haven launched its first green mortgage with a four-year rate of just 2.15% a few weeks ago.
Daragh Cassidy, Head of Communications at bonkers.ie, appeared on East Coast FM to discuss the recent developments in the mortgage market and the importance of shopping around to avail of the best rates.
Here’s an overview of the points discussed by Daragh in the interview.
Why are mortgage rates going down?
When it was announced they were leaving, it didn’t seem like it was going to be great for competition. However there are still several lenders still in the market and we’ve seen a lot of good mortgage-related news in the past few weeks, which has taken the market by surprise.
We’ve seen both EBS and Haven, a subsidiary of AIB, reduce some of their rates. And now ICS Mortgages has announced a pretty heft decrease in its rates of up to 0.5%, so this is all actually good news for mortgage customers.
So, what’s the catch?
It’s understandable why people might be sceptical, but we do need to put things into perspective.
Even after these rate cuts, Irish mortgage rates are still very high. At the moment, rates here are at the second or third highest in the Eurozone and over double the average EU rate.
The average mortgage rate in the Eurozone is 1.27% and in some countries, such as Finland and Portugal, you can get rates close to 1%.
Here the average rate on a new mortgage is around 2.8% and the rates ICS Mortgages are introducing start at 1.95%, so we need to keep this in mind.
You’d wonder in the medium to long term how Ulster Bank and KBC’s planned exits would affect the market, but there are still other players competing for business, such as Permanent TSB, Finance Ireland, ICS Mortgages and Avant Money.
Avant Money’s offering
Avant Money is a Spanish-owned lender that started selling mortgages around a year and a half ago. Avant Money entered the Irish market with a 1.95% rate, which has now been matched by ICS Mortgages. Recently Avant Money introduced Ireland’s first 30-year fixed-rate mortgage, which is great.
Avant Money’s low rates have forced other banks and lenders to react. Some of the main banks, such as AIB or Bank of Ireland, haven’t reacted quite as much, but smaller lenders have reacted.
EBS introduced rate cuts a few days ago and ICS Mortgages is responding to that.
Fixed rates have long been common in the rest of Europe, but not really in Ireland. Fixed rates give financial peace of mind and stability. So it’s a time of flux in the mortgage market, but over the past few weeks, we have seen some good developments.
How long do you have a fixed rate for?
With these rates from ICS Mortgages, they allow you to fix up to 5 years, which isn’t a huge amount of time.
ICS Mortgages also have a variable rate that can go up or down. The variable rates start from around 2.45%, which is a bit of a reduction from where they were. You can either choose a 3 year or 5 year fixed rate from ICS.
Over the last few weeks, we’ve also seen Finance Ireland and Avant Money introduce fixed rates for far longer, from 10-30 years. This means you could have the same monthly repayment for the entire length of your mortgage.
Does the Central Bank determine the deposit people must have?
In most cases, the Central Bank requires first-time buyers to have a 10% deposit and for second-time buyers, movers or subsequent buyers to have a 20% deposit. There are sometimes exceptions to that where you can have a smaller deposit.
Often the rates you’re given depend on the equity in the home and the size of your deposit. Usually the bigger the deposit you have as a first-time buyer, or the more equity you have as a switcher, the lower the rate you’re going to receive.
With the new variable rate from ICS Mortgages, if you have a 40% deposit the rate is 2.45%, but if you only have a 10% deposit the rate is 2.7%.
While rates have changed, the deposit needed hasn’t really changed, which is a difficulty for many first-time buyers, particularly with rents being as high as they are.
However, the rates are going down and it could put a bit more money back into people's pockets. For example, with the new variable rate, a first-time buyer who chooses the 2.7% variable rate and has a €250,000 mortgage, could be looking to save themselves around €60 a month, or €725 a year.
It’s not an insignificant amount of money and it does all add up.
Can you move or switch mortgages with a long-term fixed rate?
Until recently in Ireland, the longest fixed rate you could get was 5-10 years. Now they’re getting longer and longer.
A 30-year fixed rate is a long commitment but that’s not to say you can’t change mortgages. There is some flexibility built into fixed rates, but there are legal fees involved that you would have to pay if you came out of a fixed rate early.
A long-term fixed rate is a big commitment and takes consideration. This is where you should try to get good financial advice and chat with your mortgage broker.
There’s stability and peace of mind knowing your mortgage rate won’t change and fixed rates are becoming more popular. According to the Central Bank around 75-80% of all new mortgages taken out are fixed-rate mortgages.
Compare the market
It’s always advisable to compare the market and shop around for the best mortgage rates. For most, your mortgage is going to be the biggest monthly expense and it’s definitely something you don’t want to overpay on.
You can use bonkers.ie to compare the mortgage market in just a few easy steps!
With our mortgage calculator, you can easily compare interest rates, loan terms, mortgage offers and cashback incentives from all of Ireland’s mortgage lenders, including ICS Mortgages and Avant Money.
More people are opting for fixed rates over variable rates, however it’s important to know the pros and cons of both so that you can make an informed decision.
We recently released an episode of our bonkers.ie podcast where we discussed the movement in the mortgage market. Take a listen to learn more about the mortgage options available to you.