Will AF have any impact? Not in its current scope.
1. It's aimed at people the banks won't lend to.
2. They've been allocated something like 250m. New mortgage lending is expected to top 8bn this year.
But, I do expect changes in focus, and policy over the next 12 months.
Note: this is all my personal opinion. I don't have any inside information!
Last year there was a dramatic shift in market share of new lending among the banks, so while the overall market grew they didn't all win equally.
AIB saw their share drop from 38% to 31%, with PTSB the surprise winner moving from 9% to 12%. BoI was the other gainer. The impact of AIBs rate drop in Q3 wouldn't have impacted full year numbers, but it's obvious that the cash back offers are winning big market share.
However, 40% of PTSB new business is coming through brokers, so the combination of cashback and broker commissions must be hurting their profitability, especially if they are the main loser in the switcher numbers.
There is a possibility that BoI will re-enter the broker market at some stage to win market share. Will they do that in exchange for cashback?
AIB have a stated aim of winning mid 30%'s market share. You might see them have a new offer this quarter - whichever brand they use is unknown. So far no other lender has competed directly with them on variable rates, but there is better value out there. If the go head-to-head with BoI on fixed rate offers through EBS it could get competitive very quickly. I think they might go for cheap longer term fixed rates, and a reduction in their higher LTV variable rates under the BoI fixed rate.
UB will continue seeking large shares of specific cohorts through targeted pricing. They confirmed this week that 60% of their portfolio is on tracker rates, so they'll seek very profitable lending. Expect great fixed rates on large mortgages with low LTVs.
KBC will continue as they are targeting long term fixed.
On the question re switcher: the switcher / refinance market last year was over 1bn. It's a valuable market, but I can't see any lender currently benefiting from market churn. They'll target customers they can keep.
The big switcher question is will it be enough to force PTSB to reduce their SVR.
Something you didn't ask was about tracker movers. I think when the dust settles on the tracker scandal, banks will focus on offers to get people to trade up to get portions on their loan onto higher rates. Of course they're not competing with other banks, but I expect promotion to be increased on these.
Overall, my prediction for this year is that we'll see variable rates on low LTVS under 2.5% from AIB, 1 year fixed at 2.8% from a few lenders, and EBS offering 5-7 year fixed at 3%.