In previous times, when you were in the market for a mortgage, you were just happy to be approved a loan irrespective of punitive rates or terms and conditions. With the scarcity of borrowers in recent years, the Irish lenders are now putting their best foot forward in order to attract business. Discount and tiered rates – the lower the loan to value the cheaper the interest rate – are now the norm but a new trend has emerged over the last few months – the cash back mortgage. Bank of Ireland originally gave 1% of the amount being borrowed 10 days after drawdown of the mortgage to the applicants. In recent weeks, this was doubled to 2% and has been extended to the end of March. The latest lender to join the “what freebies can we give our prospects” war is Permanent TSB. They now match the 2% cash back e.g. on € 500,000 mortgage, you would receive € 10,000 a mere 10 days after drawdown… AND they have better tiered rates than their competitor.
Is it good value ? Yes if the interest rate is competitive. An offer of 0.5% discount on the standard variable rate for 12 months can be misleading – it’s good for those 12 months but reality strikes thereafter. A little like the sales process – yesterday you were a prospect, today you are a client. Long term benefits easily outweigh short term gains. Then there is the forgotten mortgage intermediary to consider – most of them do not charge fees as the lenders pay “commission” for business introduced to them – usually 1%. With both Bank of Ireland and Permanent TSB now offering 2% cash back to their customers, those same customers are hardly likely to darken the doorstep of an intermediary. Ironically Bank of Ireland do not appoint “brokers” but Permanent TSB do.
Is there still a role for the mortgage “broker” ? If you are prepared to troll through ALL the lenders and compare their respective offerings to ensure you are getting best value, then you would be better going direct. But the vast majority firstly do not have the time to check whether they are really getting a good deal or not and secondly never fit perfectly into the specific parameters of the lenders’ mortgage requirements. Every lender has their own mortgage calculator and you could be approved by one lender and not by another. Sometimes it can be frustrating but that is where a good financial adviser comes in and for those not interested in Mortgage Wars, the adviser can prove to be the Force that awakens their mortgage dreams.