But the question is - will they reduce their variable rates any mroe? Or is that it for the foreseable future?
Seems to be a price war at the moment which is good for all of us mortgage holders. What is the most they will drop can't go lower than 2.5% but question is what is the most they can rise they definitely can rise again to 3.5% 4% and the rest.
I also don't see 2.5% as the floor. Look at the rest of Europe.
That has be be priced into rates here so can't see it going below 2.5 unless the courts start to change which won't be happening any time soon
This is a difficult one. When the Fair Rates Mortgage campaign started, SVR's were in the above 4.5% and if you were not on a tracker, it was very difficult to get a rate below 4%. European rates were half of this, floating around the 2% mark.
There are rates of 2.6% floating around now between BOI (including cash back) and Ulster Bank, but most are floating around the 3% mark for most LTV's. Those in negative equity have to fix in reality.
I would agree that I would see 2.5% as the floor really for rates in Ireland in the short term - and happily have taken it 2 years ago. While European rates are lower, we all accept the repossession issue, the cost of going business/compliance here is higher, lack of arrangement fees never mind incentives to switch, size of the market, political interference, historical debt impairment issues etc.
I see this move by KBC as a very positive one, and hopefully there will be a reasonable take-up on it, especially at the 60-80% LTV where I do think it is good value over a 10 year time frame (taking into account international instability and historic low interest rates). I am in favour of long term fixed rates for most customers, combined with a change in behaviour for people to switch once this fixed term is up.
If someone on a 79% LTV took out this mortgage over 25 years (fixed for 10), and paid the 10% over payment permitted, at the end of the 10 year period their LTV would be less than 49%, assuming the house price did not fall. This would support them refinancing the mortgage at a 50% LTV, ideally for another 10 years.
The question is will other banks bring out similar products to compete with KBC - the answer is BOI will probably do so as they want to seriously play in the fixed space. I am not sure about AIB and Ulster Bank as they appear to be more variable focused. Who knows with PTSB...
Another big question is what would the break fee be if you wished to break this in 1-2-5 years time. With cost of funds being quite low at the moment, I don't expect this would be a high charge unless interbank rates continue to go further negative