Mortgage wars: Rival banks expected to reduce rates in response to AIB cuts

Mortgage lenders will now have to cut their rates in response to AIB reducing its variable, fixed and loan-to-value rates, experts said.

Stockbroking analysts said AIB has now put huge pressure on Bank of Ireland and Permanent TSB, in particular.

AIB's move to cut its variable rates by 0.25pc to 3.15pc from November will mean a huge gap emerges with the Bank of Ireland variable rate.

From next month, AIB's variable rate will be 1.35 percentage points lower than the Bank of Ireland one.

Bank of Ireland has a strategy to win mortgage business by offering up to 3pc of the value of mortgages in cash-back to new customers. It may now decide to weather it out, or only slightly tweak its fixed rate offering, analysts said.

But Permanent TSB is likely to be under pressure to respond to AIB's rate cut.

The move by AIB to cut fixed rates, and reduce its overall interest rate margins, also means there is now no expectation of a rise in European Central Bank rates until 2019 at the earliest, analysts said.

"AIB's move potentially puts more pressure on the other banks to respond," analysts at Goodbody Stockbrokers wrote in a note to investors.

Experts also say that AIB's move to cut its fixed rates from Monday by up to 0.5pc will help it protect its leading market position in a growing market.

Cuts are expected in the coming weeks from EBS and Haven, which are both AIB subsidiaries.

And the reductions are also likely to raise further additional competitive pressures across the market in due course, Goodbody said.

Investec's Philip O'Sullivan said that the European Central Bank and wholesale market rates of zero are set to continue next year.

It will be 2019 or 2020 before the "interest rate environment begins to normalise", according to Mr O'Sullivan.

Fianna Fáil finance spokesperson Michael McGrath said the AIB move shows that banks can afford to cut rates and still achieve more than healthy profits.

The onus now is on other banks to introduce further rate cuts if they don't want to lose market share, Mr McGrath said.

He also called on Bank of Ireland, Ulster Bank, Permanent TSB and KBC to introduce rate cuts.

Meanwhile, the AIB Group has been called upon to immediately cut the mortgage rates at its EBS and Haven subsidiaries.

There are indications the banking group may lower EBS rates in coming weeks, but the failure to announce EBS reductions along with the AIB cuts has annoyed mortgage campaigners.

Brendan Burgess of the Fair Mortgage Rates campaign welcomed the AIB reductions, but said a large gap had now opened up with EBS.

The EBS variable rate is 3.7pc compared with AIB's, which is due to fall to 3.15pc at the start of next month.

"EBS customers are furious that they are not benefiting from these rate cuts. EBS is funding its cash-back offers to new customers by charging existing customers more. The quicker the Dáil bans these cash-back offers the better," Mr Burgess said.

Red flags and hidden costs: Need-to-know tips for the first-time buyer applying for a mortgage

Are you trying to save in the hope of securing a mortgage - but confused about what lies ahead?

In the year to date, mortgage approvals for first-time buyers are up 43pc year-on-year, but this doesn't mean it's an easy process. spoke to the experts about what first-time buyers should be looking for:

What is the main thing to note when you’re shopping for a mortgage?

Managing Director at Bluewater Financial Planning Steven Barrett said the first thing a first-time buyer should look at is the interest rate that lenders are offering.

"It is so hard to get a mortgage these days, there are no myths really, it is actually a very difficult process," Steven told

"The interest rate is the big thing to look out for, how much you’re going to repay.

"First-time buyers tend to look for the longer term which is better so you can borrow more money to get started. If you’re looking for the longest term, you’re looking to keep down repayments.

"This is new for people to hear, they’re not taught these things about finance or mortgages in school or college."

Independent financial advisor with 52Financial Ross Connolly said he would advise speaking to a mortgage broker.

"Obviously I'm biased but the benefits of having a broker are; we do the shopping around for the client, we build a file which would be neutral and throughout the process we think of which bank we think would be most suitable for the client," he said.

What are the red flags banks look for when you’re applying for a mortgage?

"Overdrafts that are not organised or arranged with any bank are also a big no-no," Ross Connolly said.

"We stay away from overdrafts. You don't want to paint a picture of someone who is living from pay cheque to pay cheque. You don't want to be seen to be gambling or any excessive spending. We would cut that down. The accounts need to be clean."

He said that they advise customers to do an Irish Credit Bureau check on themselves online at to make sure they haven't missed any old credit card bills or supermarket clubcards they didn't realise they had signed up for.

"The aim is to catch any missed payments at all," Ross added, "just so you have any questions answered before the bank has to ask them."

Steven Barrett of Bluewater Financial Planning said the first thing a bank will do is look at someone's credit rating.

“I’d always advise people to get a copy of their own records so they know what they have, it is the first thing a bank will do," he said.

"My advice to first-time buyers is to make sure the minimum credit card payments are paid off each month because that will affect your credit card rating and make it more difficult to get a loan.

“Missed payments on your direct debts are a big no-no as well. Banks do go through statements line by line. These days, people do spend a lot with their debit card, so your whole lifestyle is showing up on bank statements. If you miss payments, the bank will say, ‘well this person isn’t paying their bills and it is a red flag’.

“You can get declined for repeated missed payments,” Steven added.

What if I have savings or debt in other accounts, like a Credit Union account?

There is no problem having savings in a different account, you can bank and save whatever and wherever you want, mortgage specialist with Mortgage Negotiators Shane Connole advised.

"You can bank and save wherever you want, and you can walk in to get a mortgage wherever you want. Just because you bank with Bank of Ireland doesn't mean you can't shop for a mortgage with KBC," he said.

"The debt on the other hand, you can have your loans wherever you want but this may have a negative impact on your loan approval.

"The debt will absolutely contribute to your credit rating, but it can also have an effect on how much you're borrowing."

Is it true online gambling accounts are a 'no-no' when applying for a mortgage?

The short answer is yes. Steven Barrett of Bluewater Financial Planning describes online betting accounts as a “big no-no”.

“It’s a big no-no if you’re using Paddy Power and other gambling websites on a regular basis.

“When people gamble regularly, they tend to leave the money in the online account if they win and this only goes one way. If they can see that you’re a regular gambler, they will refuse a loan.”

If I’m renting, will the bank take it into consideration for a credit rating?

Banks will take your monthly spend on rent into account for your repayment capacity, Ross Connolly advised.

"When it comes to the savings aspect, the repayment capacity would be the correct label to put on it.

"A couple paying €1,000 a month in rent need to know that this €1,000 will go towards their repayment capacity for a €1,200 a month mortgage, it will be considered savings for want of a better word.

"If you can get a car loan cleared coming up to the application, this can also be considered as repayment capacity."

Can I get a financial gift from a relative?

Mortgage specialist with Mortgage Negotiators Shane Connole said the simple answer is "yes".

"There are no rules around it," he said, "but there are areas to watch out for. No bank likes approving mortgages where your own contribution is a 100pc gift. They would expect for a 10pc deposit, that 5pc of the money is your own savings and the other 5pc could be your gift. An example, you're buying a house for €200,000 and need a €20,000 deposit. You will need to show that €10,000 of that is from your own funds."

The second aspect of receiving a gift is to watch out for tax, Shane Connole advised.

"It's better to receive the gift from a relative in a direct bloodline, based on the tax position. If you're getting a gift from an aunt or cousin, the bank will want to know how you will pay the tax and revenue on it.

"Finally, the bank will want to see the gift money in your own account at a certain stage of the process."

Are there any myths or misconceptions you've come across?

"I wouldn't come across a lot of misunderstandings," 52Financial's Ross Connolly said, "but some people don't understand the reason behind the saving.

"The main reason to save is so you can prove you have the repayment capacity when it comes to your mortgage.

"If your mortgage repayment is €1,000 a month, they may look for €1,200 in repayment capacity in case there is an increase in interest rates.

"People nowadays do seem to be more educated about applying for amortgage.

"It is rare that I come across an online betting shop in a bank statement. There is a high level of advice out there," he added.

If I'm buying a doer-upper, can I get any special treatment?

There are a few things to note if you're investing in a doer-upper, mortgage specialist Shane Connole said.

"The key areas are; do you need planning permission, you need invoices for the work you're doing to the property, and you need to ensure the loan you're applying for does not exceed 90pc of the total end value of the property.

"If you buy a house for €200,000 and do €50,000 worth of work, this does not mean the end value of the house if €250,000.

"The rule is it's 60pc of the value of works. So if I buy for €200,000 and I do €50,000 worth of work, the end value of the house would be €230,000.

"A lot of people fall flat on that. Banks cannot lend more than 90pc of the value per completion.

"You will also need invoices and typically you need a registered builder's invoice."

Shane added that there is not a 'scheme' asuch in place for those buying doer-uppers, but you can receive the money in stages.

"You get the first part of the loan paid down when buying the house, and then your value of works is split into two payments. You receive one payment when half the work is done on showing an invoice, and you receive the second payment when the works are completed."

So, you’ve saved for your deposit – are there any hidden costs?

As well as your deposit, financial experts advise that you have the money aside to pay for the extra costs which include stamp duty, solicitors’ fees and surveying fees.

“First-time buyers will have to have a 10pc deposit saved, but you will also need to show that you can pay for the associated costs,” Steven Barrett said.

“You could be paying up to €2,000 for a solicitor, and when it comes to conveyancing, it does need to be done properly by a qualified solicitor. Cheapest is not always best.

“You are talking another few hundred euro for a surveyor, and you have to be able to show the bank that you have that in addition to your deposit.”

Any expert tips for the first-time buyer?

Bluewater’s Steven Barrett believes a separate savings account is key to securing a mortgage.

“Having regular savings each month is a big plus, having an account where regular money goes in and you don’t touch it,” Steven said.

“If you’re putting in a thousand euro on a regular basis but then taking money out of it, they’ll just say, ‘well, this person isn’t really saving’, even if it’s just every quarter, they’ll discount it or they’ll average it out.”

He continued; “Regular saving is the key. If mortgage rates go up by 2pc you need to show you can afford the higher repayments. If you’re paying rent, you need to show that you’re also regular saving in an account you don’t touch.

“You need to have control over your finances and try not to have any debt.”

Householders told to fill up oil tank before price hikes

Householders have been warned to prepare for higher prices of electricity, gas and home-heating oil this winter.

A move to hike prices will reverse almost two years of energy cost reductions.

The return to price increases has prompted warnings to householders to lock into discount deals now, and those who use home heating oil are advised to get their tanks filled before prices start to surge.

It comes after the wholesale price of gas, a key component in the production of electricity and used for domestic gas supply, rose by 30pc in the year.

Wholesale gas prices are now back at levels not seen since last February, according to the Vayu energy report.

Oil production and refining facilities in the Gulf Coast region of the US have been shut down due to Hurricane Harvey, equating to almost 15pc of the US refining capacity.

"Oil markets are expected to keep the bullish tone as long as refining capacity remains impacted as a result of the hurricane," Vayu said.

Petrol and diesel retailers have already warned that they are putting up prices at the pumps this week, in a move that will cost drivers up to an extra €2 to fill up.

Experts also pointed out that although energy prices have been falling overall for two years, many suppliers have only cut them marginally.

Eoin Clarke of energy price comparison site said that prices for consumers were now likely to rise.

"For anyone who heats their home using heating oil, if you can afford it, now could be a good time to fill the tank.


"This means that, if prices do go up, you'll have a full tank to work through before you have to buy at the higher price. And if prices don't go up, you'll have one of those winter bills out of the way early."

He said there have been rises in the UK market, with the most recent one a rise of 12.5pc in electricity prices from British Gas. Energy providers here tend to follow what happens in the UK.

Mr Clarke added: "The increase in wholesale prices could signal that residential price rises are on the way for consumers."

Dermott Jewell of the Consumers' Association said commodity traders have been inching up their prices for wholesale oil and gas in the last few months. He warned that events like Hurricane Harvey may be used by suppliers to hike prices for consumers.

"This news could still be 'represented' by suppliers as the occasion to increase prices by a mile," Mr Jewell said.

He called for transparency in all energy pricing.

Mark Whelan of price comparison site said: "Consumers who use home heating oil, such as kerosene or gas oil, should also brace themselves for an uncertain winter."

Energy experts said most providers offer discounts for paying by direct debit and receiving bills online, and many offer retention deals to long-term customers.

The average dual-fuel customer can save up to €318 per year by switching from standard tariffs to the cheapest electricity and gas deals.

Anyone eligible for the State-paid fuel allowance was advised to check if they are entitled to receive it. For the first time this year, those getting the €585 allowance can opt to have it paid in two lump sums, instead of weekly.

ECB fines PTSB €2.5m for breaches of banking liquidity rules

PTSB has ‘fully remediated the issue’, says ECB following issuing of first banking fine

The European Central Bank’s banking supervision arm has fined Permanent TSB €2.5 million for breaching regulatory requirements over how much cash and easily-sold assets lenders must hold to meet short-term obligations.

It represents the first imposition of a penalty on a euro-zone bank since the ECB assumed responsibility for the regulation of the currency region’s financial institutions in late 2014.

The Dublin-based bank, which is 75 per cent owned by the State, said in a statement that the breaches had arisen between October 2015 and April 2016 when it misinterpreted revised regulations in relation to its so-called liquidity coverage ratio (LCR).

“At no point during this period did the group’s actual liquidity position deteriorate,” PTSB said, adding that it had spotted the error itself and reported it to the ECB and “co-operated fully with the ECB on the matter”.

The group’s LCR has been fully compliant since late April 2016, it said. Specifically, the breach relates to a misinterpretation of how ECB funding is treated in the calculation of the ratio, according to the bank.

Banks are required by the ECB to hold enough highly liquid assets to cover the difference between the expected cash outflows and inflows over a 30-day stressed period.

The group had a liquidity buffer of about €4 billion at the time these breaches occurred and the current level exceeds €6.5 billion, a spokesman for the bank said. He declined to comment on the extent to which the liquidity ratio fell short of the ECB’s requirement when it was in breach of the rules.

PTSB was the only Irish company among 24 European banks to fail a stress test in late 2014 as the ECB’s single supervisory mechanism unit prepared to take over the supervision of euro-zone lenders. The bank subsequently raised €525 million through the sale of shares and subordinated bonds the following year to help shore up its capital base.

The liquidity breaches revealed on Monday stem from changes introduced by the European Commission regarding how ECB funding facilities should be accounted for in the calculation of a bank’s LCR. The rules set out technical instances when the repayment of ECB funding must be included in outflow rates for the purposes of LCR calculations and when they may be excluded.

At the end of 2015, PTSB was reliant on the ECB for almost €4.7 billion of funding. However, that figure had fallen to about €230 million by the end of June of this year.

Broken down, an ECB penalty of €750,000 was imposed as PTSB failed to comply between October 27th and December 31st in 2015 with requirements requested by the ECB the previous February. A further €1.75 million penalty relates to similar breaches between January 4th and April 26th last year relating to ECB requirements set in November 2015.

“The ECB notes that this breach did not change the liquidity position of Permanent TSB Group Holdings plc and that the bank has fully remediated the issue,” the ECB said.

Meanwhile, Moody’s, one of the world’s largest credit assessment firms, upgraded its view on PTSB’s unsecured debt and deposit ratings on Friday, partly as a result of the bank’s falling reliance on capital markets and the ECB for funding.

At the end of June, the bank’s key loan-to-deposits ratio stood at 110 per cent, down from 124 per cent a year earlier. However, Moody’s new ratings on PTSB’s unsecured debt and deposits remain below what the agency deems to be “investment grade”.

How 30pc of houses for sale can’t find buyers despite crisis. Despite crisis, large number of homes remain unsold

One-in-three houses put on the market almost three months ago has failed to sell.

A snapshot of almost 200 properties across 15 counties ranging from two-bed apartments to €1m-plus homes shows that 30pc, or 58, remain on the market despite the housing shortage.

Experts said that in many cases, houses were overpriced leading them to be slower to trade hands. However, some expressed surprise at the lack of movement, given the housing crisis.

Details of 193 houses and apartments for sale on were recorded on March 9 and March 13 last.

They include two-bed apartments, three and four-bed houses and luxury homes costing at least €1m.

As of June 1, 135 were sold or withdrawn from the market and 58 remained unsold.

One property source expressed surprise at the number of unsold homes, suggesting that given the low levels of stock people were snapping up units, even those in poor condition in need of substantial work.

"We're reading every day that there's not a lot of stock, and I'm surprised to hear that," one said.

"A lot of people would be happy to take on a refurbishment job because it might be a cheaper option, and there may not be much competition. The mid-level stuff like a regular three-bed semi-D is the most sought-after thing."

But the figures show that even in areas of high demand, not all homes are selling.

Of 56 properties recorded in Dublin, 15 remain on the market - 26pc. In Cork, four of 13 are on the market, or 30pc. In Galway City, 11 homes were noted and four are unsold, or 36pc.

While three-bed homes are in demand, particularly for families getting onto the property ladders, some are not shifting. Details of 16 three-bed semi-detached homes in Dublin were recorded, and three remain on the market.

However, they are relatively expensive, with the cheapest in Marino priced at €425,000 and the most expensive in Rathgar costing €600,000.

The figures also show:

  • Of 59 two-bed apartments, 14 remain unsold, or 23.7pc. Four of 16 in Dublin are unsold. One unit in Kilkenny remains unsold.
  • Of 62 three-bed houses, 14 - or 22.6pc - are still on the market. Three out of 16 in Dublin, one from four in Cork and one from four in Galway City are unsold, despite high demand in these areas.
  • Of the 62 four-bed homes offered for sale, 24 - or 38pc - remain unsold.

In some cases, auctioneers have dropped the price due to lack of demand, with some properties also withdrawn from sale.

However, regional director of estate agents RE/MAX John Fogarty said that in many cases properties remained unsold because they were overpriced.

He said that in rural areas, most properties would not remain on the market for more than six weeks. In Dublin, it could take just 10 days to sell a home.

He said agents should be aware of what similar homes were selling for by examining the Property Price Register, which records the selling price of all homes, and through market knowledge.

"At the high end, what can happen is an owner may have an expectation that is not in agreement with what the agent says. In my opinion, those properties should not go on the market," he said.

"You might get a trophy home which was €3m at the height of the boom.

"Some properties of these type don't sell because the vendor wants a certain price.

"With three and four-beds, the agent will look at what similar properties went for in the months previously, and the property price register.

"You would also ring around the agents and they may have an offer in excess of the asking price.

"Because there's a shortage of properties, some firms are going in €20,000 dearer and the consumer runs with that. If customers interview three agents and one has a silly figure, they need to be aware of that."

Chief executive of the Institute of Professional Auctioneers and Valuers Pat Davitt said there was "no doubt" that some homes were over-priced, but added that the market was not as strong as portrayed in some areas.

"The market is being blown up to be a lot stronger than it is in a lot of places. There's different areas of Dublin selling very well.

"But in other (parts of the city) people won't pay the asking price, they are more discerning. If the first-time buyers grant encourages more to build properties, the price of housing will come down."

Eoghan Murphy: Car insurance needs supervision at EU level

In the Oireachtas Finance Committee last Thursday, Senator Kiernan O'Donnell asked a pertinent question - how do we avoid another Setanta?

The Supreme Court decision on the Setanta case between the Law Society of Ireland and the Motor Insurers' Bureau of Ireland is very welcome. This decision in favour of insurers removes the uncertainty that has seriously delayed the payment of over 1,600 outstanding third party claims.

We can now accelerate the process of resolving these claims which have been outstanding since Setanta collapsed in 2014. Work is already underway to expedite the first payments from the Insurance Compensation Fund; the first tranche is expected shortly.

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Dairygold link up with Zurich on insurance deal

Competition looks set to intensify in the farm insurance sector following Dairygold's decision to partner with Zurich Insurance to provide deals for its co-op members.

In a leaflet sent out to its more than 3,000 milk suppliers last week, as well as farmers who trade with the co-op, Dairygold stated that it had reached an agreement with Zurich Insurance to offer "preferential rates to Dairygold members and account holders".

The tie up between Dairygold and Zurich has been viewed in some quarters as a snub to FBD. However, Dairygold management defended the decision.

"Dairygold board and management are constantly seeking opportunities to provide financial benefits for its members," the co-op stated. Dairygold engaged with a number of product and service providers to negotiate preferential offers for the benefit of members and account holders. The outcome of these negotiations led to attractive offers being tabled by Top Oil and Zurich," Dairygold explained.

"Top Oil is offering all Dairygold members and customers the opportunity to apply for a Dairygold/Top Oil fuel card which can be used to purchase diesel, petrol and sulphur-free gas oil at very competitive prices. The Zurich offer relates to farm, household and vehicle insurance and it commits to providing competitive quotes with some specific enhancements to Dairygold members," it added.

The co-op stressed that members had to engage with the suppliers directly and that Dairygold's only role will be to confirm society membership.

A spokesperson for Zurich Insurance said the company was: "…delighted to be developing an affinity scheme with Dairygold to offer competitive farm insurance solutions for its members."