KBC fires the first warning shot in what’s likely to be an upcoming mortgage war.
Although the property market took a bit of a battering earlier in the year during the height of the Covid pandemic, things have picked up surprisingly quickly as the economy has gradually reopened.
Demand for homes from first-time buyers is still strong and estate agents are reporting brisque viewings and an uptick in prices.
This activity has spilled over into the mortgage market where lenders are back aggressively competing for business.
Ulster Bank recently launched a new mortgage cashback offer for people who switch their current account as well as their mortgage, PTSB announced a reduction in some of its fixed rates for both new and existing customers, and today KBC has announced a new cashback offer for first-time buyers and movers.
What’s happening?
KBC is now offering €1,500 cashback to first-time buyers and movers.
The new offer, which has been designed to support mortgage expenses such as legal and valuation fees, is open to customers who apply for a mortgage between 17th August and 31st December 2020 with the bank.
To be eligible first-time buyers and movers must also choose either a three, five or 10-year fixed interest rate. The offer also isn't available to anyone seeking an exemption to the Central Bank's loan-to-income or loan-to-value mortgage lending rules.
KBC’s existing cashback offer of €3,000 towards mortgage switchers remains as is.
Commenting on the news, Conor McGowan, Head of Mortgages at KBC Ireland said:
“Despite a challenging environment, we saw a stronger than expected increase in new mortgage applications and drawdowns for the month of July, as people seek to take out new mortgages and make savings on existing ones. While the landscape has changed, consumers are still looking for more choice and even better value when it comes to mortgage products, which is why we have today announced a €1,500 cash support towards mortgage expenses for first-time buyers and movers. In addition, we are continuing to offer €3,000 cash back to customers who switch their mortgage to KBC.
“We offer some of the most competitive rates in the Irish market and are currently approving 90% of all applications received. We look forward to helping our customers navigate the home buying journey through a process that offers greater convenience, flexibility and value. Our digital-first products and services mean we are ideally positioned to help customers on their mortgage journey,” he added.
Are cashback offers good value?
There’s still a lot of debate over the merits of cashback deals with many experts complaining that they have led to higher interest rates for mortgage holders here. However they’ve become extremely popular in Ireland and seem set to remain a part of the mortgage landscape for the immediate future at least.
BOI, PTSB and EBS all offer generous cashback deals of 2% or more for first-time buyers while Ulster Bank offers €1,500 towards legal fees.
KBC (along with AIB) has been the outlier up until now. Its focus has been on offering longer-term value through competitive fixed rates as opposed to upfront cashback. However today’s news means prospective first-time buyers and movers with KBC will now have access to some of the lowest rates in the market as well as a small amount of cash support, which can only be good news.
Avant Money
The timing of today’s announcement isn’t wholly surprising.
Avant Money (a new trading name of Avant Card) is set to enter the market very shortly with rates as low as 2% or less, which would undercut all the lenders here. So this could well be the first warning shot to be fired in an upcoming mortgage war.
However not all the lenders in Ireland will be able to compete with Avant Money on rate alone and will have to differentiate themselves in other ways.
Whether KBC will continue to gradually reduce its rates over the coming months or focus on new initiatives like cashback remains to be seen.
But for now KBC, with its mix of competitive rates and cash support is an attractive option for mortgage seekers.
Before you decide, always compare
Although this new deal from KBC might seem competitive, make sure you compare all rates and offers across all lenders on bonkers.ie before you commit with our free, easy-to-use mortgage calculator.
And if you want more info on the pros and cons of cashback mortgages, see here.
