"AIB accused of overcharging existing customers to fund cash-backs"

Brendan Burgess

Brendan Burgess

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The Oireachtas Finance Committee is meeting AIB tomorrow. I had sent in a few questions to the TDs to ask AIB including this one:

Cash back mortgages

Cash back mortgages are used by some lenders to keep the rates for existing customers high. For example, if we compare your two brands – AIB and EBS



AIB – no cashbackEBS – cash backAdditional interest on a €300k mortgage
Lowest variable rate <50% LTV2.75%3.3%€1,650
Lowest fixed rate 3 year fixed2.35%2.9%€1,650
90% LTV variable3.15%3.7%€1,350


With a lowest rate of 2.9% , the only way EBS can get new business is to offer cash back.

But an existing customer of EBS is stuck on this very high rate. So AIB, permanent tsb and BoI uses cash back to keep existing rates very high.

Would it not be better for all customers and all lenders if cash back were banned and lenders were forced to compete on mortgage rates and mortgage rates alone?
 
Charlie Weston has picked up on this in today's Indo

www.independent.ie

EBS accused of overcharging existing mortgage holders to fund cash-backs

Existing customers of EBS are overpaying for their mortgages so the lender can offer cash-back incentives to attract new customers, it has been alleged.
www.independent.ie www.independent.ie

Existing customers of EBS are overpaying for their mortgages so the lender can offer cash-back incentives to attract new customers, it has been alleged.

Consumer advocate Brendan Burgess said this means existing EBS customers are “subsidising” new ones by around €1,600 a year.

EBS mortgage rates are much higher than those offered by its parent AIB, which does not offer cash-back deals to new customers.

The high cost of EBS mortgages is likely to be discussed when AIB executives appear before the Oireachtas Finance Committee tomorrow, chaired by Fianna Fáil’s John McGuinness.
 
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