Key Post Bank of Ireland variable rate customers should consider fixing for one year

[Brendan Burgess]

If you have a standard variable rate with Bank of Ireland, you are paying 4.5%. Officially, they do not allow existing customers to avail of the lower LTV rates for new customers e.g. 3.9% for those with an LTV < 60%. However, if you tell them you are moving to KBC, they will do a deal with you - see
BoI cut my SVR when I told them I was moving to KBC

But what if you are unable to switch because you are in negative equity or have a poor credit record?

They allow existing customers to fix their rates.

The one year fixed rate for LTVs >75% is 3.8% a saving of 0.7% on the SVR. This is well worth considering.

You would lose out if Bank of Ireland reduced their SVR by more than 0.7% in the near future because you would have to wait a year before availing of it. You would lose out if they cut the one year fixed rate in the near future.

They have told the Minister for Finance that they will not be cutting mortgage rates, but it is probably worth waiting a month or so to see if the Minister takes any direct action. But if there are no signs of a cut at that stage, then maybe fix for a year.

I don't think you should fix for longer than a year
Table of Bank of Ireland rates - scroll down to the end to find them
While rates may not come down in the immediate future, I would expect variable and fixed rates to come down over the next year, assuming the ECB does not increase the ECB rate.

So fixing for two years at 4% is probably not a good idea.

It's a bit of a guessing game. Of course, ECB rates could rise and Bank of Ireland could increase rates and so the 5 year fix of 4.15% could look like great value in retrospect.

 

[Mackemdub]

I was making a similar consideration with Haven rates last week and had convinced myself to switch from SVR of 4.35% to 1 year fixed of 3.5% - then i realised i was looking at the new customer rates!

1 year fixed for existing is 4.15% or 2 year 3.8% so i'm going to take a chance that AIB/EBS/Haven will cut SVR by 25bps in the next few months.

Wish i hadn't dropped my crystal ball!

 

[Brendan Burgess]

I would expect AIB to cut their rates, so the factors are very different.

Brendan

 

[dgray_ie]

If you have a standard variable rate with Bank of Ireland, you are paying 4.5%. Officially, they do not allow existing customers to avail of the lower LTV rates for new customers e.g. 3.9% for those with an LTV < 60%. However, if you tell them you are moving to KBC, they will do a deal with you - see
BoI cut my SVR when I told them I was moving to KBC

Brendan, I took out a €300K SVR BOI mortgage 5 years ago on a self build (LTV >80%). Current SVR is 4.25% and almost €250k remaining with 19.5 years left.

We believe house current valuation is now > €416,000 therefore we should fall into the 60% LTV band. Broker advised best variable rate at that LTV would be KBC at 3.75% (APR 3.82%). If I open a KBC current account, arrange for our salary to be paid into it and the mortgage paid out of it, there’s a 0.2% discount which would bring the rate down to 3.55%.

My broker has advised if I continue paying €1,590 per month to BOI for 19 years and 5 months I will pay a total of €370,477 by the end. Assuming the KBC rate of 3.55%, to achieve maximum long-term savings I could shorten the term while still paying less than at present. For example, €249,169 over 18 years at 3.55% would cost €1,563 per month, or a total of €337,608 over 18 years. The potential saving is over €32,000! KBC will also pay €1,000 towards the cost of switching.

I called BOI 2 weeks ago to advise them of above to see if they could do anything however they came back few days later and told me they would not be able to give me a rate reduction.

Should I wait a few weeks /months to see what happens following Mr. Noonans chat to the banks. If I go for loan approval with KBC and their rates were to drop further would I be able to avail of that new rate?

Cheers
Dgray

 

[Brendan Burgess]

I called BOI 2 weeks ago to advise them of above to see if they could do anything however they came back few days later and told me they would not be able to give me a rate reduction.

I presume that you have a clean credit record?

I think you should ask your solicitor to write to Bank of Ireland telling them that you are moving to KBC. She should ask for a redemption value and the deeds. I suspect that you will then get a call from BoI offering you a deal.

 

[dgray_ie]

I presume that you have a clean credit record?

I think you should ask your solicitor to write to Bank of Ireland telling them that you are moving to KBC. She should ask for a redemption value and the deeds. I suspect that you will then get a call from BoI offering you a deal.

Brendan,
Yes thankfully we are both in employment and broker advised us to get credit check done with Irish Credit Bureau and we are good, never had a loan other than mortgage. I have been overpaying for over a year €2k month. I will talk to solicitor as you suggested.
Thanks,
Dgray

 

[gnf_ireland]

Dgray,
I am in a very similar situation to yourself with BOI. I have a LTV <45% on a house purchased in South County Dublin in 2011, and have been overpaying for a year. I rang BOI 3 times between January and March regarding my potential move to KBC, and closed my credit card with them during this time also. On all occasions I was told that no deal would be offered other than the fixed rate offers.

2 weeks ago I was having a bad run of it with my move to KBC. Letter of Offer has been issued but were stuck on a clause in it (house is in my name currently and moving it to joint names as part of the move to KBC. The letter of offer stated joint names in advance of the move so needed clarification to be issued and it was slow coming).

I rang BOI mortgages again as I had moved my house insurance to KBC so needed to advise them of such. I again brought up the issue of 'deals' and again they swore no deals were being done. At this stage my frustration took hold and I asked them whether they are aware of discussions on social media around deals being done and asked the question straight out if BOI were saying the people on social media were liars ! The agent said no; to which I said by that assessment you must be lying to me. At this juncture, she offered to send my case for review and would get back to me in 2 days.
A day later they came back with the 3.9% offer with no valuation required, and paperwork was issued to me the next day. Why they could not have done this in January/early February when I had requested it previously is beyond me and would not have continued the process of moving to KBC

As it turns out, the issue with KBC has been resolved and drawdown is now scheduled for Tuesday (would be today but it is a SEPA holiday in Belgium).

It is also worth noting that during the conversation, the agent did state that BOI were aware that there was advice on social media if you request the redemption value and title deeds that BOI will ring you to do a deal- so may not be as successful as before ! I had not been contacted when the request had been processed for my title deeds for example !

 

[dgray_ie]

GNF, that's interesting I had asked them if the LTV changed from >80% to <60% would they be able to offer a better rate than our current 4.25% however BOI told me 4.5% is their best variable rate regardless of LTV. I called bank again this morning noting AIB have dropped their SVR and to advise them I am aware from social media of better deals being offered to their customers, and that I have contacted solicitor and will commence process through broker to switch to KBC however naturally I would consider staying with them if they could change things. I will hear back shortly from them however I don't hold out any hope of BOI offering to drop rate by 1% to beat KBC or even matching 3.55% to keep my business. Perhaps KBC rates will fall further shortly and there will be even more of a gap between them and further significant savings for us.

Dgray

 

[gnf_ireland]

Dgray,
KBC currently offer 3.55% on their best LTV offering. AIB have effectively matched that this morning (via EBS), which is a very interesting move. AIB have also effectively matched it with a 3.6% rate.

This will definitely put the pressure back on KBC to make the next move. They were getting reasonable levels of business as they were the lowest in the market (by a margin). Now they will have to go lower if they wish to maintain that momentum.

But with AIB & Ulster Bank offering any cuts to both new and existing customers, my view is KBC will have to do the same or they will experience a drop in their level of new business to AIB and Ulster. If all 3 currently offer roughly the same rate, I know I would lean towards Ulster and AIB who have shown that they pass on cuts to existing customers, whereas KBC have not proven that yet. Sadly my crystal ball did not show this at the time when I started the switching process.

Realistically it takes ~2 months to get mortgage approval all things being equal (mine took longer as discussed above). If BOI don't play ball, I would suggest you start the mortgage application process with AIB, Ulster and KBC and once you have approval in principle from all 3 you can go back to BOI and see what they will do if anything. 3 approvals in principle would show that you are willing to invest time in moving and don't suffer from the standard inertia that the banks are relying on. Its as easy get the paperwork sorted for one as it is for 3 when it comes to approval in principle part of the process.

There is a 'hassle' and time cost, as well as a level of financial cost, associated with switching a mortgage. Would I have progressed with the KBC option had BOI offered me the 3.9% in early January when I started the process - probably not to be honest. When it eventually came in mid-April all the work had been done and a fair bit of the costs already incurred so was too late to back down at that stage.



That said, if I was on 3.9% now with BOI and they are stating that (a) they are not planning to cut their variable rates as per the news this week and (b) showing that they are unwilling to pass on cuts to existing customers without having to fight like hell to get them, I would definitely consider moving over the next few months once the AIB cut has been processed through the banks and they have made their counter rate cuts.

It is worth noting that it was the AIB cut in October 2014 that triggered the reactionary cut from the other lenders in January 2015. Lets see what happens by 1st July

 

[gnf_ireland]

however I don't hold out any hope of BOI offering to drop rate by 1% to beat KBC or even matching 3.55% to keep my business.

BOI will not offer you any better than 3.9% which they offer their new customers. I know there was a story in the press there about a 3.75% but that was exceptional as far as I know. You should consider BOI cutting your rate to 3.9% as a considerable success if they do it for you. Its sad to say that treating existing customers as equal to new customers is now considered a success !!

If BOI react to AIB's cuts, they may cut their rate to 3.7% or 3.65% at the lowest. I cannot see them going beyond that rate to be honest. When Ulster/AIB were in the 3.8% range and KBC was in the 3.55%, they still only cut to 3.9% (and they had the benefit of seeing what the others had done before they announced their cuts).

BOI clearly feel they are a 'premium brand' and can charge that premium for their mortgages and still get a reasonable level of business, especially taking their 1% incentive into account. This probably goes back to the size & quality of their current account holder base, and the fact most people will naturally talk to their usual bank when starting the mortgage process. Irish people are exceptionally slow to move banks.

Personally I never see BOI being the lowest in the market - I see AIB/EBS being pretty competitive until they are sold off, KBC continuing to cut to attract customers in the short term (they are on an aggressive growth plan in Ireland) and Ulster being reasonably competitive, positioned between KBC and BOI.

But I don't have a crystal ball either, so its only my assessment

 

[shweeney]

Dgray,
KBC currently offer 3.55% on their best LTV offering. AIB have effectively matched that this morning (via EBS), which is a very interesting move. AIB have also effectively matched it with a 3.6% rate.

This will definitely put the pressure back on KBC to make the next move. They were getting reasonable levels of business as they were the lowest in the market (by a margin). Now they will have to go lower if they wish to maintain that momentum.

But with AIB & Ulster Bank offering any cuts to both new and existing customers, my view is KBC will have to do the same or they will experience a drop in their level of new business to AIB and Ulster. If all 3 currently offer roughly the same rate, I know I would lean towards Ulster and AIB who have shown that they pass on cuts to existing customers, whereas KBC have not proven that yet. Sadly my crystal ball did not show this at the time when I started the switching process.

From a switching point of view, KBC are still offering an incentive to switch (as are PTSB and UB) - AIB/ESB are not so you have to factor in the ~€1500 cost of moving your mortgage.

 

[gnf_ireland]

From a switching point of view, KBC are still offering an incentive to switch (as are PTSB and UB) - AIB/ESB are not so you have to factor in the ~€1500 cost of moving your mortgage.

Yes agreed - this is a factor in the decision of course ! But I am assuming that all persons who are looking to move weight up all these things before moving. I am sure the 1% incentive from BOI is attractive to some as well, although as a bank they are holding firm on being pressured into reducing (to date)