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Current accounts: a deep dive

With Ulster Bank and KBC both announcing plans to exit the Irish banking market, many of you will be looking for a new home for your current account. And while options for switching may be looking more limited, there is still good value and choice on offer from the remaining players who still offer current account services in Ireland. In this podcast we take a deep dive into current accounts to see which provider is offering the best value. Here are the main questions answered and points discussed by Daragh and Rob in the podcast. Why are current account switching levels so low in Ireland? There are a few reasons why people don’t switch current accounts more frequently.  It tends to be a mix of inertia, as people don’t want to take the time and effort to switch, fear of something going wrong during the process, and also mindset. People feel like there isn’t money to be saved or they feel like all the banks are the same, but you can still save money. How to switch current accounts There are two ways to switch current accounts. 1. The Central Bank’s Switching Code The Central Bank brought in a switching code of conduct a few years ago, due to the low switching rates. The code is to make it easier for people to switch. If you’re looking to switch from one bank to another, you can fill out a switching pack and choose a date for the switch to begin. Your new account needs to be up and running within ten days of that switching date. The bank will also help you to transfer things over like direct debits, and standing orders. It’s best to switch when there’s the least activity on your account. Usually, people pick a switching date in the middle of the month.  2. Open a new bank account Another option for people is to open up a new bank account, keep their existing account and then gradually transfer things over, once they’ve gotten used to the new account. Then they can close their existing account. With this option, you’re not going to have the hand-holding that the bank provides.  Even if you use the switching code there’s probably room for improvement. Not enough people are using it due to people opening up new accounts, then not closing their old one.  What are key considerations when choosing a current account? There are several key questions to think about when choosing a new current account. Do you need an overdraft? Not all providers offer this. Are mobile payments important to you? Not all providers offer Apple, Google or FitBit Pay, although most now offer at least one. Is a branch network essential to you? If you have a small business or you need to lodge cash and cheques this may be something to consider.  Do you travel much? Foreign exchange fees charged on card payments might be something to think about. How do you use your money? If you withdraw and use a lot of cash you should know that some providers have quite high fees for withdrawals. How much can people save by switching? Banking is more personal than other products and services. Obviously with energy, it will depend as well on how much you’re using, but with a current account, it’s more complicated. On bonkers.ie you can use our comparison tool to select how many contactless payments you make or how many chip and pin or cash withdrawals you make to see the best value account for you. You could save €6-12 a month by moving to a cheaper option, as all the direct debits, standing orders, chip and pin transactions and cash withdrawals add up. It mightn’t necessarily seem like a huge amount, but that’s over €100 potentially a year.  The main current account providers There are three pillar banks left in Ireland: AIB, Bank of Ireland and Permanent TSB.  AIB AIB is the biggest and most well-known bank in Ireland, however, the current account on offer here is particularly poor value.  Pros: AIB has a large branch network. It offers both Google Pay and Apple Pay.  It has a great, user-friendly app that has a block/unblock card security feature. AIB offers an overdraft. Cons:  There is still the dreaded card reader that’s still needed to carry out various transactions.  There’s a €4.50 quarterly maintenance fee, a €0.35 fee for every ATM withdrawal and a €0.20 charge for every chip and pin transaction, self-service lodgement, online transaction, direct debit and standing order. Every time you use your account, except for contactless payment, you’re being charged. Bank of Ireland Bank of Ireland (BOI) is probably the next most well-known bank in Ireland. Pros: BOI has a large branch network. It offers both Google Pay and Apple Pay.  It offers an overdraft. All day-to-day banking is included in the monthly maintenance fee, e.g. chip and pin, cash withdrawals, lodgements, etc. BOI doesn’t charge for referral fees, which is a fee charged when a cheque bounces or a direct debit gets presented and there isn’t enough money in your account. Sometimes this costs €10-15 with other banks.  Cons: The quality of its mobile app and online banking services lag behind AIB's.  BOI has an expensive flat rate monthly account fee of €6, regardless of usage. Permanent TSB PTSB is a good option depending on how you use the account. Pros:  Like BOI, all day-to-day banking is included in the monthly maintenance fee. Every time you use your debit card to pay for something, the bank will pay you back €0.10. You can earn up to €5 per month through this feature alone, which means you could offset most of the maintenance fee each month. If you're a customer of SSE Airtricity or Sky you can get up to 5% cashback on your bills when you pay them by direct debit from the account. If you have a mortgage with PTSB and you pay it back from the Explore Account, you’ll receive 2% cashback on your monthly mortgage repayments. Cons:  PTSB’s Explore Account has a fairly hefty €6 monthly fee. Its mobile app is quite poor. It lacks basic features, such as fingerprint or face login. It doesn’t yet offer Google Pay, but this is planned to launch at some point this year. What are other banking alternatives? There are three options out there. There’s the An Post account, the Credit Union Account and then there’s the EBS Money manager account. An Post Pros: You get one fee-free withdrawal a week at an An Post ATM.  An Post offers Apple, Google and Fitbit Pay. An Post has a good mobile app on offer. Cons:  The An Post current account is quite expensive. It had a €5 monthly fee and a €0.60 ATM withdrawal fee. This may not be the account for you if you like using cash.  You'll also be charged €0.50 for any cash or cheque lodgements at your Post Office. Other than that, all your day-to-day banking is free. There’s no overdraft on this account. Credit Union Some of the largest Credit Unions in Ireland have come together under the currentaccount.ie brand for Credit Union members. Pros: Current account holders get five free ATM withdrawals a month. There is an overdraft available with the account. After the monthly maintenance fee, all day-to-day banking is free. Cons:  There’s a €4 per month fee. There’s a €0.50 charge for every ATM withdrawal after customers avail of the five free ones. If you’re a big fan of using cash, this may not be the account for you.  The Credit Union’s online banking is not quite as advanced as other providers, but it’s improving all the time.  EBS If you’re happy with the absolute most simple services, without all the bells and whistles, then EBS is potentially an account to consider and it’ll cost you almost nothing to run. Pros:  There are no real fees and charges with this account. There’s no monthly fee, there’s no lodgement fee, no ATM withdrawal fee and there’s no contactless charge.  Cons: There’s no overdraft with this account. There’s no Apple Pay or Google Pay on offer.  There’s also no mobile app, but there is online banking so you can log on and access yourself.  You can’t lodge foreign currency to the account either, it’s a Euro account only. For some that mightn’t be an issue. Revolut and N26 The fintechs are dominating the space at the moment. N26 has around 200,000 customers in Ireland at the moment, whereas Revolut boasts that it has around 1.2 million customers. Both of the accounts are quite similar and they have the same pros and cons.  N26 is actually a bank. It has a German banking licence and is licenced by the German Central bank. Your money is as safe in N26, as it is with any other bank. Revolut technically holds an e-money licence though, so there is a slight difference.  Pros: For both accounts, there’s no monthly maintenance fee and all of your day-to-day banking is free.  They have amazing mobile apps, with up-to-the-minute push notifications and analytics on your spending. The apps allow you to toggle on and off many security features. For example, you can turn off contactless payment and both apps have a block/unblock card feature. They both have in-app reward schemes. Both apps offer Apple Pay and Google Pay.  You can send money quickly and easily to other people. There are no foreign exchange fees on card purchases outside the Eurozone. So with N26 it’s unlimited for now, and with Revolut it’s up to €1,000 a month. On Revolut you can access bitcoin and other cryptocurrencies. Cons: These are online-only banks, so if you want to lodge cash, you’ll find yourself stuck. With N26 you get three fee-free ATM withdrawals each month. After that, there’s a fairly hefty €2 charge per withdrawal.  Revolut allows you to make five withdrawals a month, and there's a withdrawal limit of €200. After that, there’s either a €1 charge or 2% of the amount withdrawn, whichever is higher.  With both of these, you do not get an overdraft. Despite their cons, these fintechs are two of the best when it comes to digital offerings. How do these fintechs make money? Both apps are businesses, they’re not charities. They have had hundreds of millions in investment and Revolut hasn’t even made a profit yet. Eventually, there will have to be some sort of charges brought in.  You can get premium accounts with these providers, which is where they make money.  The apps are also branching into the insurance world, where they’re acting as a broker. It’s also likely that they’re taking a bit of a cut with their reward schemes. One place they might make more money is with credit services. Even though N26 is a bank and it does offer overdrafts in other countries, it doesn’t offer an overdraft in Ireland. IBAN discrimination Many wonder if it’s possible to get your salary paid into a Revolut or N26 account, as people want to use them as their day-to-day regular account.  Unfortunately, there’s something called IBAN discrimination that still happens in Ireland. When you take out an N26 account, you’ll be given a German IBAN and when you take out a Revolut account, you’ll be given a Lithuanian IBAN.  Some payroll systems are so old that they don’t recognise these foreign IBANs and sometimes utility companies have problems taking direct debits from these so-called “foreign accounts”, even though it’s illegal under SEPA. We’re supposed to have a single market for banking services. Is there any point in switching your current account to Ulster Bank or KBC, even if they’re leaving? If it was a mortgage, then yes, as Ulster Bank offers a great mortgage and people can still take out their mortgage with them. Even if it gets sold on, your terms and conditions need to stay the same in general.  When it comes to a current account, there’s not any point in switching. It’s not something that people are going to want to do once or twice in the space of a year.  The final say There’s no one-size-fits-all or one current account provider that ticks all the boxes.  Revolut and N26 come close to being the perfect offering. If N26 decides to offer an overdraft, and if the IBAN discrimination issue is fixed, it will be offering a great account.  Permanent TSB is probably the safest bet overall. The account has good cashback offers, there’s a strong branch network, and it accepts cash. It’s more competitive from a fee point of view than BOI and AIB. The only negative is its online offering. Switch and save today Are you considering switching your current account? What do you think of the fintechs dominating the market at the moment? We’d love to know in the comments. At bonkers.ie, we offer a range of banking comparison services that will help you lower your banking costs. Take a look at our guide on how to switch current accounts for more information on what was discussed in the podcast. We also recently made a video to evaluate the best value current accounts in 2021, which may be of interest to switchers. If you have any questions about what was discussed in today’s podcast, we’d be happy to help! We’re on Facebook, Twitter and Instagram.
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Mortgage Movement

There's been lots of movement in the mortgage market recently with Finance Ireland and Avant Money both launching new products, including the country's first ever 20-year fixed-rate mortgage from Finance Ireland. In this episode we discuss the rates on offer as well as the pros and cons of choosing a fixed rate. We also discuss recent price increases from three energy suppliers, why energy prices are on the rise, as well as the acceleration of rural broadband provider Imagine's 5G wireless service to customers nationwide. Here are the main points discussed by Daragh and Rob in this month’s podcast. Who is Finance Ireland? Finance Ireland is a non-bank lender that has been in operation for a few years.  The company is managed by the former banker, Billy Kane, who used to be the CEO of Permanent TSB, so he has a fair amount of experience. Finance Ireland has just launched Ireland’s first 15 and 20-year fixed-rate mortgages, which will add more competition and choice to the market. What’s the difference between a fixed and variable rate mortgage? A fixed-rate quite simply doesn’t change with the length of the term. You can get a fixed rate for 3 years, 5 years, and 10 years at the moment. However, in a lot of other European countries, fixed rates of 20-30 years are quite common. With a fixed-rate mortgage, the interest rate and your repayment are guaranteed not to change for that period.  A variable rate is the opposite. It can change and go up or down.  Previously in Ireland, fixed rates weren’t common at all. Back in 2010-2012 about 90% of people would have been on some type of variable rate, which includes tracker rates. Now over 80% of mortgages taken out are fixed rates. Read our guide to learn more about the pros and cons of variable and fixed rates. What’s the significance of Finance Ireland’s 15 and 20-year rates? There has never been a fixed-rate mortgage on offer here for that length of time before. Usually, fixed rates are between 3-5 years. Gradually over the past few years, some of the banks have started to offer 10-year fixed rates.  What kind of terms and rates does Finance Ireland offer? Finance Ireland offers 3 and 5 year fixed rates that are common in Ireland for first-time buyers. Now they’ve introduced new rates of 15 and 20 years.  If you’re taking out a mortgage, it’s always based on how much equity you have on your home, so this is the home to value ratio. Usually the longer the fixed rate, the higher it is  Let’s say you were buying a property for €100,000 and you wanted a mortgage for €90,000, it would mean that you’d have 10% equity. The more equity you have, the lower the rate. Looking at Finance Ireland’s 20-year rates, if you have 10% equity, so a loan-to-value of 90%, you can get a rate of 2.99%.  If you’re lucky enough to have a 20% deposit, you can get a 20-year rate of 2.9% and if you have a 40% deposit, you can get a rate as low as 2.6%. So they’re quite competitive.  Looking at the 15 year fixed rates, they go from 2.5% to 2.95% depending on how much equity you have. Then their 10-year rates go from 2.4% to 2.85%. Who is Finance Ireland targeting? They seem to be targeting everyone. They’re on offer for first-time buyers, movers and switchers in both rural and urban areas. If applying for a mortgage, you should check them out. Often in Ireland, people go with big bank names, such as AIB and BOI, instead of lesser-known lenders.  What is Avant Money offering? Avant Money lowered some of its rates and introduced its first 10-year fixed rate.  Their 10-year fixed rate goes from 2.1% to 2.65% depending on how much equity you have in the home, which is very competitive. What are the pros and cons of longer-term mortgages? The main pro is that the rate is not going to change. It adds peace of mind and certainty.  The biggest con is that you really need to lock into it. If you want to overpay or pay it off early, there will usually be a charge. Similarly, there would be a charge for switching your mortgage to another bank. These breakage fees can be quite high. Some banks are giving a little bit of flexibility, where they will allow you to pay off a certain amount extra each year. With Finance Ireland, you can overpay on its 15 and 20-year mortgages by 10% without being charged extra.  Avant Money doesn’t offer that added flexibility right now, but there are rumours that they’re looking into it and that in the coming months they’ll allow you to overpay as well. Can mortgage holders avail of lower rates overtime when the loan to value rate decreases? With Finance Ireland, as you progress through your mortgage and as you pay it off year on year, it puts you onto lower rates. This is automatic.  Some other banks, maybe once throughout the term of your mortgage they will write out to you and offer you a slightly reduced rate. Will mortgage rates go down in the future? It's tough to know, as both KBC and Ulster Bank have announced their planned exits. So in the medium term, this will put upward pressure on prices, but it’s good to see some competition.  Even though we see rates going down slightly, it never seems to feed through into the official average rate because there are so many terms and conditions attached to some of the lower rates. For example, sometimes you have to buy an A-rated home.  Avant Money has the lowest rate in the market at the moment of 1.95% which was launched just over a year ago. This is low in an Irish context, but that compares to an average interest rate of 1.33% in the Eurozone and rates as low as 0.7% and 0.8% in countries such as Portugal and Finland.  What if your mortgage gets sold on in the future? KBC and Ulster Bank customers will have their mortgages sold on, even though their terms and conditions stay the same.  If you sign up to a 20-year fixed rate with Finance Ireland and 5 years later they leave, it doesn’t matter who gets that mortgage, your repayment terms will not change and you’ll still have 15 years remaining at what you agreed to pay. Is competition the only thing that will put downward pressure on prices? Yes, but stronger competition is better than more competition.  Even though the consolidation we’re seeing in the Irish banking sector is unfortunate, if it means that Permanent TSB could come out as a stronger and bigger bank, maybe it might not be as bad as we thought.  We’re seeing a spate of energy price increases lately. Why are prices on the rise? There are a few reasons why energy prices are increasing again. A lot of our electricity still gets generated from the burning of fossil fuels. The price of coal, oil and gas has unfortunately skyrocketed on international wholesale markets in the last few months. This is due to supply and demand as the world economy has started to open back up. Unfortunately, that’s feeding through to higher prices. There’s been a few power plants that are out of action for maintenance reasons. We’ve seen a greater number than usual out of action, which hasn’t helped things either. Over the past few weeks, the level of wind output has been a lot lower than what we would have usually expected, which impacted renewable energy production. Another reason being cited for the increases are network charges. What are those? The electricity grid in Ireland is managed by EirGrid and the gas network is managed by Gas Networks Ireland.  They charge suppliers fees and tariffs for the maintenance of the networks. For example, for the gas pipes, the pylons, the electrical wires, etc.  The maintenance charges in Ireland are the third highest in Europe. These fees have been increased by the regulator in recent months and they’re being passed onto consumers. In Ireland, we have a target to generate 70% of our electricity from renewable energy by 2030. There's a huge investment needed in the electrical grid to make that a reality.  Renewable energy and fossil fuel energy don’t tend to mix very well together, so it takes a lot of work and investment to change the grid. It’s been suggested that anywhere between €2-2.5 billion is needed by the Irish government into the electrical grid to handle all of this solar and wind energy.  We’ve only been investing in renewable energy for the past ten years or so. This move over to renewable energy is likely going to cost consumers money for the next 15-20 years. Read our recent blog to learn more about why energy prices are increasing.  What exactly is an energy bill made up of? An energy bill can be broken down into four parts: Around 20% of an energy bill goes to government compensation. This includes VAT and the PSO levy or carbon tax.  Around 40-45% is the cost of the actual fuel.  Around 30% goes towards the distribution or network transmission tariffs that all the suppliers ultimately get charged for the upkeep of the grid.  The rest, around 10%, goes to the supplier.  Imagine has announced the accelerated rollout of its 5G wireless broadband. Who is Imagine? Imagine Communications is an Irish owned communications company that provides broadband services to customers around the country.  Imagine focuses on bringing high-speed broadband to underserved rural areas and to people who aren’t covered by high-speed providers.  Imagine is widely recognised as an innovator in wireless broadband. The company is accelerating the rollout of its 5G wireless broadband services at the moment. What exactly is 5G wireless broadband?  When we usually refer to broadband, more often than not we mean fixed-line broadband.  5G wireless broadband is broadband delivered to your home wirelessly through a signal that’s broadcast from pylons in towers and similar infrastructure that’s located in your locality.  For it to be effective, you have to be within 15-20 kilometres of one of these towers. If you want this installed in your home, Imagine will come out and will install an outdoor antenna that will feed the signal into your wireless WiFi router, which will then disperse the signal to your connected devices. What speed will you get with Imagine? Imagine offers one deal at the moment for this and the speeds available are up to 150Mbps. This is a lot faster than what a lot of people would get in urban areas.  It costs €59.99 per month on a 12-month contract, but it does offer a great option for those in rural areas. Imagine are increasing their investment in the network due to increased demand for improved services as a result of the ongoing pandemic. The National Broadband Plan is only in its infancy and Imagine is prioritising customers who can’t get good broadband. It currently has 268 masts in Ireland but is significantly rolling out more infrastructure around the country.  What are the pros and cons of 5G? The main pro is that it’s given people a minimum speed of 150Mbps. It isn’t the fastest achievable broadband or download speed, but it’s more than enough for people who want to stream, game online or work from home.  The main con is that it’s expensive. There are much better options available, but maybe not to people in rural areas though. The set-up cost is quite expensive with Imagine too, at €150. You can pay €50 initially and then pay the remaining €100 off in your first and second bill.  What’s the quality of the 5G signal like? With 5G, the signal is harder to transmit. The frequency waves are shorter, so it’s obstructed by objects in its way, e.g. trees, buildings, and even weather.  Capacity impacts the signal, too. If there are a lot of people in your area signing up for this deal who are streaming and gaming, then it can affect the speed. Save money with bonkers.ie On our website, you can easily compare mortgage rates, energy prices and broadband offers in your area to ensure that you’re not overpaying on your monthly bills! Are you trying to get on the property ladder? It’s best to minimise mistakes in the run-up to applying for a mortgage. Here’s a list of 9 common mistakes to avoid when applying. If you’re looking to combat the rising costs of energy, switching is a great option. Take a look at our guide on how to compare gas and electricity prices or check out the commonly asked questions about switching energy suppliers. We talked a lot about 5G broadband in today’s podcast. If this is something that appeals to you and you’re looking to switch broadband providers, here are 7 key things to consider before making your decision. What do you think of Finance Ireland’s new long-term fixed rates? We’d love to know your thoughts! You can reach out to us on Facebook, Twitter and Instagram.