Mortgages gold rush on the cards as ‘cash-back’ deals could be banned

Mortgages gold rush on the cards as ‘cash-back’ deals could be banned

 

Christian McCashin

 

Fears that ‘cash-back’ mortgage offers will be banned this summer is expected to cause a surge of homeowners switching their mortgage.

Fianna Fáil is looking to ban the offers, which give borrowers a return of around 2% of the mortgage back in cash.

This would force the banks to compete on interest rates alone, which is seen as better value in the long term.

 

Fianna Fail’s spokesman for finance Micheal McGrath has proposed an amendment. Pic: Collins

The Variable Rate Mortgages Bill would give the Central Bank the power to limit interest rates on mortgages, although a warning by the Attorney General that it might not be constitutional will be looked at. However, Fianna Fáil finance spokesman Micheal McGrath has proposed an amendment to it banning mortgage cashback deals. The offers, where a bank hands over a percentage of the loan in cash on drawdown, have become increasingly popular and are used by banks to drive up their market share, without having to cut mortgage rates.

Bank of Ireland offers homebuyers and mortgage-switchers 2% back on their mortgage as cash, with another 1% available for the bank’s current-account holders.

The EBS, which is part of the AIB group, offers €2,000 back in cash, and Permanent TSB offers not just 2% cash back on the value of the mortgage, but also 2% of the monthly mortgage repayment back in cash every month.

Ulster Bank offers a flat payment of €1,500 towards legal fees. ‘This amount is fixed and will not change if your legal fees are higher or lower,’ it says.

Struggling homeowners’ campaigner David Hall, of the Irish Mortgage Holders’ Organisation, welcomed the proposal to scrap the cash-back offers. ‘Ultimately you’re paying for it. All of these things cost money, there’s no such thing as a free lunch in banking,’ he said. ‘You might get a couple of quid now but ultimately it’s being added on to the bottom line of variable rates, that’s paying for it.

‘So you’ll never get variable rates lower if you keep having these scams. By scrapping them they’ll compete on the straight-forward rate, there’s no misinterpretation, no sneaky language, very straight forward, you’re just going on straight, raw rates,’ he said.

 

Joey Sheahan, of MyMortgages. ie, believes a number of factors have led to a surge in enquiries in the past few weeks. ‘Currently the mainstream lenders are offering sizeable cash incentives to certain cohorts of the mortgage market to encourage them to move lenders,’ he said. ‘The merits of this are up for debate but Fianna Fáil is putting forward a proposal to ban these cash-back offers.

‘If accepted, the Bill could come into force by the summer, so we are going to see large swathes of people – who might have, up until now, been on the “switching fence” – make moves to avail of these offers before they are taken off the table.’ Brokers forecast the switcher market alone will experience double-digit growth in the first half of the year, as an increasing number of mortgage-holders learn of the option which could potentially save them anywhere in the region of €300 a month or €112,000 interest over the lifetime of a €350,000 mortgage, about a third of the loan’s value.

In the first half of last year 1,319 people switched or re-mortgaged but that is expected to grow to at least 1,500. That figure could go as high as 2,000 during the first six months of this year.

Switching and remortgaging saw the largest increase in transactions, up 44% on 12 months earlier, the most recent figures show, up from 309 in November 2016 to 445 in November last year, an extra 136 mortgages.

Mr Hall said mortgage-holders should take up the cash-back offers while still available but warned: ‘People should ensure that they benefit from it, that there’s nothing hidden, that there’s no disadvantage with the mortgage rate.

‘Also, all brokers should declare what commission they’re getting so the public understand that if you’re switching from Bank of Ireland to AIB and AIB are paying the broker €500 that you’re told that in advance.’

 

Source: https://extra.ie/2018/01/24/news/irish-news/mortgages-gold-rush-cash-back-deals-banned

 

If you are interested in getting a mortgage and would like to speak to us at MyMortgages.ie please don’t hesitate to contact us at info@mymortgages.ie in Cork +353 21 4277037 or 353 86 8060601

MyMortgages Ltd t/a MyMortgages.ie is regulated by the Central Bank of Ireland

 

 

 


 

Savings of around €300 a month have resulted in a surge in mortgage holders changing lender, experts have reported. One broker yesterday told how enquires about switching had trebled this month – and predicted the market will see double-digit growth before the end of June.

Joey Sheahan. Of MyMortgages.ie, credited news coverage of cheaper deals that can save around €112,000 over the lifetime a typical €350,000 home loan.

He said: “Mortgage holders seem to now be aware of the facet that switching lenders to avail of a better rate might be an option for them.”

 

Source: The Sun (Eire)  17 /01/2018

If you are interested in getting a mortgage and would like to speak to us at MyMortgages.ie please don’t hesitate to contact us at info@mymortgages.ie in Cork +353 21 4277037 or 353 86 8060601

MyMortgages Ltd t/a MyMortgages.ie is regulated by the Central Bank of Ireland


MyMortgages.ie Cork Dublin
Fiona Reddan

Last year the Competition and Consumer Protection Commission warned that cashback offers might not make financial sense in the long term because of the higher rates often also charged.

New mortgage rates bill could see popular cash back offers banned – but home owners may benefit from pressure on rates

An amendment to a bill aimed at limiting interest rates on mortgages could see banks also banned from offering customers cash back on their mortgages. If enacted, it is hoped that banks will have to compete on the basis of their interest rates, rather than the selection of incentives they can offer potential customers.

According to Michael McGrath, finance spokesman with Fianna Fail, the Variable Rate Mortgages Bill, which he proposed in 2016 to give the Central Bank the power to limit interest rates on mortgages, is to be subject to an expert impact assessment. This comes on the back of the Attorney General warning that the bil may be unconstitutional.

The expert review is expected to take a couple of months, although Mr McGrath said he is “confident that the bill is constitutional” and that it will go ahead as planned.

In the meantime, Mr McGrath has proposed an amendment looking to see the practice of cashback on mortgages being banned. In recent years this has become an increasingly popular tool used by banks to drive up their market share, without having to cut mortgage rates. Bank of Ireland for example offers home buyers and switchers alike 2 per cent back on their mortgage as cash,with another 1 per cent possibly available for current account holders with the bank, while AIB subsidiary EBS offers €2,000 back in cash, and Permanent TSB offers not just a 2 per cent cash back on the value of your mortgage, but also 2 per cent of your monthly mortgage repayment back in cash every month.

“Customers like the attraction of cash back sums, but they can end up paying far more over the long term in terms of higher interest rates,” Mr McGrath said, adding that the amendment will initially focus on cashbacks, but may also consider other incentives such as money back on legal fees.

Last year the Competition and Consumer Protection Commission warned that cashback offers might not make financial sense in the long term becaue of the higher rates often also charged.

If the amendment is put forward and the bill is enacted, Mr McGrath said that banks will have to compete solely on interest rates, and not on incentives such as these.

“I am confident that if these cash back promotions are removed from the market, it will result in downward pressure on rates,” he said.

Of course Fianna Fail will need Dail support for the Bill, and as Mr McGrath said, “that will be tested in the coming weeks”.

Switch now to save

If this ban does materialise, many homeowners may rush to avail of the deals while they’re still available.

In recent years, Irish homeowners have appeared loathe to switch; figures from the Banking and Payments Federation of Ireland for the third quarter of 2017 show that just 777 borrowers switched or re-mortgaged, during the period, although the numbers switching are up 15 per cent on the year.

Already this year however, Joey Sheahan, head of credit at Cork-based MyMortgages.ie, has seen a jump in inquiries, and he expects the proposals to ban bank incentives will lead to an even greater level of activity as people try to “get in” before any such legislation is introduced. This means that the number switching could go as high as 2,000 during in the first six months of 2018.

While Mr Sheehan concedes that the merits of the cashback offers available “are up for debate”, he expects homeowners to make moves to avail of these offers “before they are taken off the table”.

Indeed while the offers can seem attractive, for many homeowners the financial gains of securing a lower interest rate can far outweigh any cash back offers.

This means that irrespective of the cashback offers, switching in itself often makes an awful lot of sense, particularly given that rates have fallen over the last 24 months. Mr Sheahan for example, says that someone on a €350,000 mortgage could save anywhere in the region of € 311 per month and € 112,000 over the lifetime of this 30-year mortgage.

Mr Sheahan gives the example of a couple with a € 390,000 mortgage (LTV>80%) outstanding over 28 years at a variable rate of 4 per cent, who switch to a four year fixed rate of 2.6 per cent. This lowers their monthly repayments by € 300 and saved interest of € 99,000 over the remaining term, while also cutting almost six years off their mortgage term.

 

Source: https://www.irishtimes.com/business/personal-finance/are-we-going-to-say-goodbye-to-cash-back-mortgages-1.3357467

If you are interested in getting a mortgage and would like to speak to us at MyMortgages.ie please don’t hesitate to contact us at info@mymortgages.ie in Cork +353 21 4277037 or 353 86 8060601

MyMortgages Ltd t/a MyMortgages.ie is regulated by the Central Bank of Ireland


MyMortgages.ie Dublin Cork

MORTGAGE cashback offers look set to be banned in a move that would hit first-time buyers and switchers hard.

Banks have been accused of using cashback incentives to camouflage their exorbitant mortgage rates.

Now a Fianna Fáil bill that will ban the practice of banks offering cash incentives to first- time buyers and movers could be law by the summer.

The Central Bank and the Competition and Consumer Protection Commission are also both opposed to cashback offers, as they see them as a device by banks to avoid cutting interest rates.

Mortgage rates in this country are a multiple of those paid by borrowers in the rest of the eurozone.

Banks, including Bank of Ireland, Permanent TSB and EBS, offer cashback of 2pc of the value of the mortgage drawn down to switchers and first-time buyers.

This works out at €2,000 for every €100,000 borrowed.

Separately, it emerged that fast-track planning applications for the development of more than 4,000 new homes will be decided within weeks.

Charlie Weston and Ronald Quinlan

Source: https://www.pressreader.com/ireland/irish-independent/20180113/284614602943074

If you are interested in getting a mortgage and would like to speak to us at MyMortgages.ie please don’t hesitate to contact us at info@mymortgages.ie in Cork +353 21 4277037 or 353 86 8060601
MyMortgages Ltd t/a MyMortgages.ie is regulated by the Central Bank of Ireland

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