Which lender in a time of rapidly changing mortgage rates?

For a long time, it has been fairly easy to identify which lenders to avoid and which to consider.

ptsb and BoI were to be avoided. They had very high rates for existing customers so even if you got cash back, unless you switched lender, you would end up with a very expensive mortgage over the longer term. And as most people didn't switch lender, then just avoid them. A lot of people defaulted to their SVR which was as high as 4.5%.

AIB had a long record of treating customers fairly on mortgage rates. They charged the same rates to new and existing customers. They had a comparatively low variable rate. So they were always a good option.

Avant then came into the market and was cheaper than everyone else. But they were selective and they got so busy that it was frustrating to deal with them.

Finance Ireland and ICS were often good value and I often included them in the Best Buy tables. But now it's become clear that anyone who took out a fixed rate with either of these lenders is probably facing very high rates when the fixed rate ends as they are not funded by cheap deposits.

So whom to recommend now?

If you looked at the Best Buy Tables yesterday, Avant was the best value. But they put up their rates and so are no longer the best value. But if you start looking today, by the time you draw down your mortgage the other lenders may have pushed up their rates and so Avant may be the best value again.

I still think one should start with AIB and Avant. They are likely to be the best value when you come to draw down your mortgage and they are likely to be the best value over the longer term.

But here are the Best Buys for 5 years for <90% LTV after the recent Avant increases.



If you are borrowing (or switching) €250k, it's hard to argue with the ptsb 3.1% rate given that you are getting 2% cash back as well.

So a few guidelines

1) Avoid Bank of Ireland, they charge existing customers higher rates than new customers, so you will pay a lot more in the longer term.
1A) Avoid Finance Ireland and ICS as they are dependent on money market rates and their future value is very difficult to predict
2) Long term value is very important. Most people think that they will just switch after an attractive cash back deal. In practice most don't or can't switch and end up paying very high rates over the longer term.
3) You will not know who will be the cheapest when you actually draw down your mortgage, so apply to AIB, Avant and ptsb.
4) Avoid variable rates and short-term fixes - anything less than 5 years.
5) Be very careful about permanent tsb. They have a long record of charging existing customers very high rates, so only go with them if the case is compelling.
6) One advantage of ptsb is the way in which they treat overpayments. The overpayments build up as a credit on your account. While you can't get this money back, you can take a payment break until you use up your credits. This would be very helpful in many cases.

@Paul F pointed out to me that variable rates for AIB are now lower than their 5 year fixed rates.

The Irish market is so dysfunctional and uncompetitive that it's difficult to predict what will happen.

I don't really trust any of the lenders which is why I like fixing for 5 years.

But what about fixing for 20 years with Avant at 4.45% instead of 3.1% for 5 years with ptsb?

I just don't like fixing for that long period of time. But maybe with a 2% maximum early redemption fee it's worth considering.

Brendan

Brendan Burgess said:

The Irish market is so dysfunctional and uncompetitive that it's difficult to predict what will happen.

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Is it really fair to describe the Irish mortgage market as uncompetitive?

We've some of the lowest new business rates in the eurozone.

Brendan Burgess said:

@Paul F pointed out to me that variable rates for AIB are now lower than their 5 year fixed rates.

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Wouldn't you expect that to be the case?

Hi Sarenco

We have had years of mortgage rates much higher than the rest of the eurozone. The fact that they are now comparable for new business is good news but I doubt that it's a permanent change. And, of course, existing customers who don't switch or who can't switch or who don't realise that they are paying 4.5% are still being exploited.

Brendan

Sarenco said:

Wouldn't you expect that to be the case?

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This should have been the case for the last few years. But variable rates were kept artificially high because people defaulted to them and did nothing about them.

So it should be the case as we expect rates to rise but I hadn't noticed it.

Brendan

Brendan Burgess said:

We have had years of mortgage rates much higher than the rest of the eurozone

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That's not really true Brendan.

Over the last several years, the rates charged on all outstanding mortgages in Ireland have been broadly in line with the eurozone average as many borrowers had the benefit of cheap trackers. However, new business rates were certainly higher than the eurozone average.

That position has now reversed - new business rates in Ireland are now amongst the lowest in the eurozone. However, I suspect that the rates charged on all outstanding mortgages in Ireland remain broadly in line with the eurozone average as trackers no longer look like such a bargain.

Brendan Burgess said:

And, of course, existing customers who don't switch or who can't switch or who don't realise that they are paying 4.5% are still being exploited.

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Most lenders wrote to borrowers on SVRs advising them of the cheaper fixed-rates on offer. You can bring a horse to water...

I absolutely agree that captive borrowers whose mortgages have been transferred to vulture funds are deserving of a degree of protection, which warrants legislative intervention. But that's a fairly net issue.

Some of Permanent TSB's are eye-catching at the moment, but it's worth bearing the following in mind:

• They might increase their rates again soon. (They have only increased theirs once so far, versus two for AIB/Haven and three for Avant.)
• Even if your mortgage is more than €250k at the moment, it won't be forever – and so there will come a point in the future when that generous discount won't be available to you when you go to re-fix
  • The same is true of AIB but the discount, and therefore the concern, is not as big
• It will be a few years before we know whether PTSB have stopped discriminating on rates between new and existing customers for good, or only for a period

Against all that, some people here have reported being able to get a PTSB mortgage/switch their mortgage to PTSB very quickly. That might not be everyone's experience, though.

The only sensible approach seems to be to apply to several of the above lenders at the same time, get approval in principle from as many of them as you can, and do as many of the subsequent steps as you can before you have to tell your solicitor which lender to try to get full approval (a letter of offer) from.

Would a solicitor be willing to get full approval from several lenders? Would they charge extra for that?

Interesting point about the balance falling below €250k. I hadn't thought of that.

But that applies to all good deals from ptsb. They might have a competitive rate today on €200k, but they might not have it in 5 years.

That is why I said:

Brendan Burgess said:

They have a long record of charging existing customers very high rates, so only go with them if the case is compelling.

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Is 3.25% + cash back vs 3.55% and no cash back compelling? I think it probably is.

I am opposed to cash backs. Especially when the interest rate is higher than the non cash back deals. But if you can get a low rate and cash back?

Brendan

Brendan Burgess said:

So a few guidelines

1) Avoid Bank of Ireland, they charge existing customers higher rates than new customers, so you will pay a lot more in the longer term.
1A) Avoid Finance Ireland and ICS as they are dependent on money market rates and their future value is very difficult to predict
2) Long term value is very important. Most people think that they will just switch after an attractive cash back deal. In practice most don't or can't switch and end up paying very high rates over the longer term.
3) You will not know who will be the cheapest when you actually draw down your mortgage, so apply to AIB, Avant and ptsb.
4) Avoid variable rates and short-term fixes - anything less than 5 years.
5) Be very careful about permanent tsb. They have a long record of charging existing customers very high rates, so only go with them if the case is compelling.
6) One advantage of ptsb is the way in which they treat overpayments. The overpayments build up as a credit on your account. While you can't get this money back, you can take a payment break until you use up your credits. This would be very helpful in many cases.

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I understand your dislike of BOI, Brendan, but if you are organised enough to switch lenders when the fixed terms ends, BOI have some competitive rates, particularly for their high value mortgages (HVM - borrow >250k): 4 years 2.45%; 7 years 2.8%. No cashback on the HVM mortgages.

In my opinion, the decision to choose or avoid BOI is more nuanced, and has become even more nuanced as competitors' rates increase, than your advice to simply Avoid them. There are of course risks that your circumstances change and you cannot easily change lenders and these risks counterbalance against the costs savings made over the fixed terms. Of course there are also risks that you choose a more expensive competitor and then they change their policy so that only new customers can avail of best rates (as per BOI current policy).

Brendan Burgess said:

Is 3.25% + cash back vs 3.55% and no cash back compelling? I think it probably is.

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It probably is.

PTSB approx total cashback (2% of balance at drawdown and 2% of every monthly payment minus account fees) over 5 years, assuming a 25-year term:

• €250k balance: €5,000 + €1,100
• €350k balance: €7,000 + €1,685
• €450k balance: €9,000 + €2,270

But if PTSB increase that 3.25% rate to, say, 3.75%, the comparison needs to be re-run – especially considering that you can have a four-year fix with AIB at 3.3%. And AIB give €2,000 cashback to switchers.

As per Brendan's original post on this thread, things have got much more complex and fluid since the ECB rate hikes cycle started. With people now having to weigh up not just rate, but also a very different rate environment and constant rate changes.

Anyone thinking about a new mortgage, fixing or switching should therefore talk to a broker (pick one who has all the lenders and will give a free consultation) to get the best advice for their own circumstances. If switching they should also ask the broker about the deal they would get by fixing with their current lender.

A good broker should give you relevant advice even if there is nothing in it for them. Right now for example we are telling a lot of AIB customers on lower LTV's they are better off fixing long term with AIB rather than switching.

That all said, we have rated the current market options based on what we think makes up a good mortgage to help people doing research on what is best for them.

As well as the rate (we use the average rate across the whole mortgage term for this) and likelihood of approval, the possibility of rates staying high or getting higher now has to be factored in. Current low fixed rate deals not being available in future now has to be considered making fixing for longer preferable. Speed of application is also important as rates may even rise when you are in the application process.

As mentioned elsewhere in this thread, I'd strongly recommend looking at more than the introductory rate as this can be very misleading.

The table below is what we currently believe the top 5 mortgage products are rated based on the factors we believe are most important in a mortgage.


Rating Weighting: Rate 30%, Security 30%, Approval 20%, Speed 20%

Hopefully this is useful information for those pondering their options.

Mark Coan said:

Rating Weighting: Rate 30%, Security 30%, Approval 20%, Speed 20%

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Hi Mark

I do like the approach, but what do these terms actually mean?

I would have thought that the rate was by far the most important and would deserve a weight of 80%.

I will reflect on it further, but my approach would be something like

1) History of treatment of mortgage customers. That would pretty much exclude Bank of Ireland and ptsb.
2) Rate - 80% weighting
3) Speed of approval - 20%

Mark Coan said:

Hopefully this is useful information for those pondering their options.

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To be honest, I find it incredibly confusing. But maybe to posters that know more about mortgages it might make sense.

Why doesn't the AIB 5 year rate feature in your rating? Or any of AIBs green rates?

I wouldn't have Avant taking 4 out of the top 5 spots.

Mark Coan said:

Rating Weighting: Rate 30%, Security 30%, Approval 20%, Speed 20%

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Security of what? It's not a deposit.

For me weighting would be about 85% rate, 15% other stuff like speed and rase of approval.

I like the idea of the composite comparison. However, it's hugely subjective. Especially the weightings.

I can see why you use aprc but Avant is a special case. As a new lender they won't actually have a meaningful variable rate that customers can avail of for a couple of years. As the initial lot of 3 year fixed customers get close to maturing I would expect Avant to increase the rate. So the current approach probably biases the results.

Is there any argument to rule in BOI based on being a large stable domestic bank, i.e probably unlikely to sell your loan to a vulture fund?
We're AIP with them and I'm loathe to start again with PTSB or AIB.

Bow tie said:

Is there any argument to rule in BOI based on being a large stable domestic bank, i.e probably unlikely to sell your loan to a vulture fund?
We're AIP with them and I'm loathe to start again with PTSB or AIB.

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All 3 banks have used vulture funds in the past.

Given the costs associated with repossession/realising the underlying collateral in Ireland, vulture funds will likely be a route for banks to clear pools of non-performing loans. However, that probably only applies if there are a lot of new mortgages slipping into arrears.