In a first for the Irish market, the fixed rates customers are offered will now be based on the energy rating of the property they buy and not on the loan-to-value ratio.
Bank of Ireland (BOI) has announced that it’s completely redesigning how it prices its fixed mortgage rates in a move which will see most people being able to avail of cheaper rates.
Previously, like all lenders, BOI set its rates based largely on the loan-to-value (LTV) ratio, meaning those with bigger deposits or more equity in their homes were charged lower rates.
However, in a first for the Irish market, and perhaps even a first for Europe, BOI is getting rid of this concept entirely and will now base its fixed rates on the energy rating of the property instead.
BOI will now offer a base rate to all customers and will then apply a sliding scale discount based on the energy rating of the property. All properties with a BER, from A to G, will be able to avail of a discount, which is different from other lenders at present which only offer discounted rates to those buying homes with an A or B energy rating.
The discounts will range from 0.05 percentage points on properties with a BER of G to a 0.35 percentage point discount on those with an A rating.
And importantly, the size of your deposit will no longer make a difference to the rate you’re offered.
BOI is calling these new rates 'EcoSaver' mortgage rates.
Here's a look at how BOI's new fixed rates stack up, all of which come with up to 3% cashback.
|
No BER/BER Exempt |
G |
F |
E |
D |
C |
B |
A |
|
|
Rate type/Discount |
0.00% |
-0.05% |
-0.10% |
-0.15% |
-0.20% |
-0.25% |
-0.30% |
-0.35% |
|
1-year fixed rate |
4.65% |
4.60% |
4.55% |
4.50% |
4.45% |
4.40% |
4.35% |
4.30% |
|
2-year fixed rate |
4.65% |
4.60% |
4.55% |
4.50% |
4.45% |
4.40% |
4.35% |
4.30% |
|
3-year fixed rate |
4.75% |
4.70% |
4.65% |
4.60% |
4.55% |
4.50% |
4.45% |
4.40% |
|
5-year fixed rate |
4.75% |
4.70% |
4.65% |
4.60% |
4.55% |
4.50% |
4.45% |
4.40% |
|
10-year fixed rate |
5.05% |
5.00% |
4.95% |
4.90% |
4.85% |
4.80% |
4.75% |
4.70% |
BOI also has a set of slightly lower rates that it offers customers taking out a 'high-value' mortgage of €250,000 or more. As previously, these rates don't come with cashback.
|
No BER/BER Exempt |
G |
F |
E |
D |
C |
B |
A |
|
|
Rate type/Discount |
0.00% |
-0.05% |
-0.10% |
-0.15% |
-0.20% |
-0.25% |
-0.30% |
-0.35% |
|
4-year high-value fixed rate |
3.95% |
3.90% |
3.85% |
3.80% |
3.75% |
3.70% |
3.65% |
3.60% |
|
5-year high-value fixed rate |
4.25% |
4.20% |
4.15% |
4.10% |
4.05% |
4.00% |
3.95% |
3.90% |
|
7-year high-value fixed rate |
4.30% |
4.25% |
4.20% |
4.15% |
4.10% |
4.05% |
4.00% |
3.95% |
Online hub and support
To coincide with the launch of BOI's EcoSaver rates, an online hub will help customers understand their current energy rating, as well as the work and costs required to achieve a better BER. An online retrofitting calculator will show the cost of retrofitting and the potential savings due to lower EcoSaver mortgage rates.
BOI has also partnered with SSE Airtricity to provide a one-stop-shop for its customers for BER assessments, home retrofitting services, and assessments of works and quotes.
We recognise there are challenges in the market with regard to availability of suppliers and retrofit specialists. Partnering with SSE Airtricity should bring synergies and improve the process for customers.
Alan Hartley, Director of Homebuying, Bank of Ireland
Variable rates
BOI is also tweaking its variable rates.
One single rate of 4.15% will now be offered to all customers regardless of their LTV or the energy rating of the property they’re buying.
Previously BOI’s variable rates ranged from 4.15% to 4.75% depending on the LTV. So it's a big reduction in some cases. However the bank will no longer offer cashback on its variable rates which may be a disappointment to some.
|
Rate type |
Loan-to-value |
Previous rate |
New rate |
Change |
|
Variable |
≤60% |
4.15% |
4.15% |
N/A |
|
Variable |
>60% - ≤80% |
4.45% |
4.15% |
-0.30% |
|
Variable |
>80% |
4.75% |
4.15% |
-0.60% |
A better deal?
All the main Irish banks now offer some type of green rate and these are generally the lowest rates in the market. And in recent times the gap between green and non-green rates has gotten bigger. AIB, EBS and Haven all recently cut their green rates by 0.20 percentage points while leaving their non-green rates unchanged for example.
However in the vast majority of cases you’ll only qualify for a green rate if you buy a new-build home. And not everyone can afford this. Most first-time buyers, particularly in the main cities, will buy much older second-hand homes as new-build prices are completely out of their reach.
As such there’s been criticism from some that green rates are discriminatory and unfair on those who aren't wealthy enough to afford newer properties.
For example, at present, a standard first-time buyer with a 10% deposit who is borrowing €270,000 could get a five-year green rate of just 3.65% with AIB. However the best non-green rate for the same person is 4.55%. So it’s a big difference.
As such, BOI’s approach seems a bit fairer. Yes - the better the energy rating, the better the rate. But the difference isn’t as stark as there’s a sliding scale of discounts for all properties with a BER, from A to G.
And in most cases, homeowners will pay less compared to previously. Sometimes far less.
For example, using the same example as above, a standard first-time buyer could previously get a four-year rate of 3.95% with BOI and this reduced to 3.65% if they bought a brand-new home with an A rating. But under the bank’s new pricing, someone buying a home with a BER of E or better, which is achievable for most buyers, would get a rate of 3.80% or lower. While someone buying an A-rated home will now get rate of 3.60%. Again undercutting the previous rate.
When will the new rates come into effect?
The new rates will go live from 18th April.
Who are they available to?
The new rates are available to first-time buyers, movers and switchers.
And they’re available to existing customers of BOI as well. However if you’re an existing customer of BOI you may not save money by switching to one of the new EcoSaver rates - it’ll all depend on the rate you’re currently on right now.
The fixed rates BOI offers its existing customers are also slightly different to the ones it offers new customers that we've outlined above. But in general they're also better than the rates it offered its existing customers until now.
Do I still need a deposit?
Yes. You'll still need your standard 10% deposit in order to get a mortgage with BOI. But now, a bigger deposit won't get you a lower rate with the bank. Only buying a more energy-efficient home will.
Get your mortgage with bonkers.ie
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