Brendan Burgess
Founder
- Messages
- 54,803
When Richie Boucher appeared before the Oireachtas Finance Committee on Wednesday, he said that comparing Irish mortgage rates with the Eurozone was misleading. It would be fairer to compare them with mortgage rates in Northern Ireland where the Standard Variable Rates were similar. You can see the interaction with Michael McGrath here.
OK, so let's do as Richie suggests and compare the mortgage markets in the North and the South as Bank of Ireland operates in both markets
|The Republic|Northern Ireland
Central Bank rate|.05%|0.5%
BoI SVR|4.5% |4.5%
Number of competitors for BoI|4|24
Lowest rate available from BoI|4%|1.98%[FONT="]BoI rates table Republic
The lowest rate available from Bank of Ireland in the Republic is 4% for a 1 year fixed with an LTV < 75%
[/FONT]
[broken link removed]
The lowest rate available in the North is 1.98% for 2 years fixed with an LTV of <60%. They charge a £799 arrangement fee for this rate to some customers. If you are borrowing £200,000, a £799 fee is the equivalent of 0.2% extra onto the rate.
At first glance, the mortgage rates in the North seem comparable to those in the Republic. Published standard variable rates are indeed similar. The mortgage rates for high loan to value mortgages e.g. 90% LTV, are very similar to those in the Republic c. 4.5%. But the lenders charge much lower rates for low LTV mortgages. In the Republic, the discount for lower LTV mortgages is tiny.
The Northern Ireland market is a highly competitive market, with banks actively chasing each others' customers to switch for a better deal. In particular the lenders chase the low LTV business and offer a good discount. After a few years, the combination of capital repayments and any increase in the value of the property puts the borrower into a lower LTV category and so they pay a lot less.
This ad on their website shows just how competitive the market in Northern Ireland is and how Bank of Ireland tries to win new customers from the existing customers of other banks
[broken link removed] is a good example of a lender which offers good long term value and tries to retain its customers. All these rates are tracker rates for the full term of the mortgage
Max LTV 90% |4.29% (Base rate + 3.79%)
Max LTV 85%|3.69% (Base rate + 3.19%)
Max LTV 75%|2.19% (Base rate + 1.69%)
It is extraordinary to think that a customer in Northern Ireland with an LTV of less than 75% can get a cheap tracker for the life of the mortgage.
And don't forget that most borrowers have an LTV of less than 75%. They start out with an LTV of 80% or 90%, but with house price increases and capital repayments, they can be in the <75% category within 5 years.
OK, so let's do as Richie suggests and compare the mortgage markets in the North and the South as Bank of Ireland operates in both markets
Central Bank rate|.05%|0.5%
BoI SVR|4.5% |4.5%
Number of competitors for BoI|4|24
Lowest rate available from BoI|4%|1.98%
The lowest rate available from Bank of Ireland in the Republic is 4% for a 1 year fixed with an LTV < 75%
[/FONT]
[broken link removed]
The lowest rate available in the North is 1.98% for 2 years fixed with an LTV of <60%. They charge a £799 arrangement fee for this rate to some customers. If you are borrowing £200,000, a £799 fee is the equivalent of 0.2% extra onto the rate.
At first glance, the mortgage rates in the North seem comparable to those in the Republic. Published standard variable rates are indeed similar. The mortgage rates for high loan to value mortgages e.g. 90% LTV, are very similar to those in the Republic c. 4.5%. But the lenders charge much lower rates for low LTV mortgages. In the Republic, the discount for lower LTV mortgages is tiny.
The Northern Ireland market is a highly competitive market, with banks actively chasing each others' customers to switch for a better deal. In particular the lenders chase the low LTV business and offer a good discount. After a few years, the combination of capital repayments and any increase in the value of the property puts the borrower into a lower LTV category and so they pay a lot less.
This ad on their website shows just how competitive the market in Northern Ireland is and how Bank of Ireland tries to win new customers from the existing customers of other banks
The initial discounts and arrangement fees confuse the picture a little bit, so what rates do lenders charge without these complications?
[broken link removed] is a good example of a lender which offers good long term value and tries to retain its customers. All these rates are tracker rates for the full term of the mortgage
Max LTV 85%|3.69% (Base rate + 3.19%)
Max LTV 75%|2.19% (Base rate + 1.69%)
It is extraordinary to think that a customer in Northern Ireland with an LTV of less than 75% can get a cheap tracker for the life of the mortgage.
And don't forget that most borrowers have an LTV of less than 75%. They start out with an LTV of 80% or 90%, but with house price increases and capital repayments, they can be in the <75% category within 5 years.