What is driving the demand for cash back offers?

[Sarenco]

I'm pretty sure the Central Bank's LTV/LTI restrictions are driving a lot of this "strong appetite" for cash offers.

In most countries you often have to pay a lender an arrangement fee to take out a mortgage but the opposite is rapidly becoming the case in Ireland.

 

[Brendan Burgess]

So BoI came up with the cash offer.

It has been very successful - ptsb and the EBS have been almost forced to follow.

The LTV restrictions don't apply to switchers?

I think that they may be a factor in FTBs and SSBs but I think that the main factor is that they borrowers see cash and their eyes light up, even if it's their own cash in the case of BoI and ptsb.

But the EBS deal is really surprising. I can't see why anyone would take out a mortgage with BoI or PTSB.

Brendan

 

[Brendan Burgess]

In most countries you often have to pay a lender an arrangement fee to take out a mortgage but the opposite is rapidly becoming the case in Ireland.

In the UK, lenders usually give you a choice - for example:

 

[Sarenco]

I can't see why anyone would take out a mortgage with BoI

I gather BOI are attracting a significant share of the fixed-rate market (which now represent roughly half of all new mortgages).

Switchers represent less than 7% of new mortgage approvals - FTBs are by far and away the biggest market segment.

If they have struggled to put the necessary deposit together, a 2% cash back offer is very attractive in terms of helping to meet all the other upfront costs associated with purchasing and furnishing a home.

 

[pauric]

I can't see why anyone would take out a mortgage with BoI or PTSB.

Brendan

I know you preach this message quite a lot but I will give you some perspective from someone who took out a BOI mortgage and got 2% cash back as I don't think you are right in all scenarios.

I signed up for a 1 year fixed rate of 3.4% which gave me an effective rate of 2.96% in year 1. There was no other mortgage provider 3 months ago who were close to this.

While I am locked in for 5 years unless I want to give back the 2% on a pro rata rate I can still change to their lowest rate in a years time. Rates are likely to come down by next year so I will be able to hopefully drop to a lower fixed rate. Unfortunately at the current time their variable rates are a rip off but their fixed rates are some of the best on the market.

They don't have different rates either for new and existing customers either.

I'm looking at the first 5 years of the mortgage and they were the cheapest I could go for an getting 2% cash back is a huge incentive for a FTB. If Im in a situation where I'm unable to switch in 5 years time then so be it but it's a risk I've decided to take.

 

[gnf_ireland]

@Brendan Burgess As you know I have spoken to you about this already and in particular someone I know who has gone for a 5 year fixed with BOI. To be fair they were not motivated as much by the 2% cashback but more on the 'professionalism' shown by BoI during the process.
There are lots of comments on here on how Ulster and AIB in particular are slow, need to be sent documents multiple times etc. While they may be the cheapest, their IT systems probably as not as solid due to lack of investment (I am guessing). BoI are quite good 'front of house' most of the time I have ever dealt with them

And yes, I imagine the 2% is appealing for someone who is stretching themselves to purchase a house. It provides some welcome relief for all the money going out on fees and furnishings and maybe allows someone to buy a new sofa or do up the kitchen that they otherwise may have to wait to do etc.

I also see the appeal for new mortgage holders on going into a fixed rate initially - it provides some stability and certainty in what is effectively the biggest financial jump in most peoples lives. Most people I know have gone fixed on their first mortgage (unless they were on a tracker)

Switching is not a major market - and I don't believe will become one for a good while yet. FTB's are where the market is at !