KBC fuels the mortgage war as bank cuts a string of interest rates

Another bank has raised the stakes in the mortgage war with new cuts to interest rates.

KBC Bank is putting it up to its rivals with reductions in its two, three and five-year fixed rates and it is decreasing its loan-to-value (LTV) variable rates.

The move comes days after Ulster Bank cut a range of fixed rates, and will be a challenge to the big players, Bank of Ireland and AIB.

The KBC reductions will apply to new and existing customers and mean the bank will have some of the lowest mortgage rates in the market.

The new rates take effect from April 3.

The bank has cut rates by up to 0.2pc in a development that will leave a number of its mortgage rates at, or around, 3pc.

The challenger bank offers a discount of 0.2pc for mortgage borrowers who open a current account.

However, from next month, its 10-year rate will be 3.2pc for those with a loan to value of between 60pc and 80pc, up from 2.99pc. This rate includes the current account discount.

Fixing for 10 years was proving popular with those who were settled in their home and had built up some equity in their property, the bank said.

Only Bank of Ireland and KBC offer fixed rates for 10 years. Its LTV variable rates will come down to between 3pc and 3.3pc for those with a current account at KBC.

The lower rates are for those with higher deposits, or more equity built up in their homes.

And KBC is making a play to attract switchers, by continuing to offer €3,000 in cash for those moving their mortgage to it.

KBC Bank director of products Fergal O'Riagain said consumers were looking for greater choice, better value and certainty over the long term. He said: "Our new pricing reflects these customer needs."

Michael Dowling ,of Dowling Financial in Dublin, said he was not surprised KBC had reacted after Ulster Bank cut its rates.

"They were never going to let Ulster Bank steal a march on them. It will be interesting to see if the big two lenders, AIB and Bank of Ireland, which have 60pc of the market between them, react," he said.

He said the KBC 10-year rate was proving popular.

The reductions come as borrowers have been advised to consider locking in to fixed rates after the European Central Bank hinted it could soon raise its key rate.

The ECB kept its key lending rate at 0pc last week, where it has been for two years.

But there are indications that it is about to change course in a move that is set to cost householders thousands of euro.

A 0.5pc rise will add almost €100 a month to the repayments on a €300,000 mortgage.

People on variables would be wise to consider fixing now before rates rise. Those already on fixed rates would not be affected, while tracker customers should do nothing, mortgage experts said.

David Kieran