BANK OF IRELAND announced this morning that it will offer to pay stamp duty for first time mortgage applicants to help buyers with stamp duty costs.
The bank said that it is “very keen to support first time buyers”, and it’s not hard to see why. They represented almost half of the new mortgage market in value terms in 2013.
BoI is offering the deal to all first time buyer mortgages drawn down between 2 April and 30 September this year.
But just how good is this deal, and what does it say about the state of the Irish mortgage market at the moment?
1. Is it as good as it looks?
Not really, says personal finance expert Bob Quinn of moneyadvisor.ie. The deal, Quinn says, is more about making a splash and attracting customer’s attention than it is about saving money for mortgage holders in the long run.
“It’s a gimmick. It’s back to the days of the bank paying your legal fees for switching mortgages. Customers need to exercise caution. €2,000 back on your €200,000 mortgage could end up costing you more than if you avoided a gimmick.”
Simon Moynihan of price comparison website bonkers.ie disagrees, saying that the BoI offer could be “a great help to first time buyers.” He said that the emergence of offers like this shows that banks have “a serious will to lend” again.
2. How much will it save me?
According to Quinn, the real question is how much a deal like this could cost you. Again using the example of a €200,000 mortgage, he estimates that the difference of one per cent over thirty years is close to €50,000 over the lifetime of the mortgage.
He said consumers need to be wary and keep in mind that a small saving in the short run could be balanced out by the cost of paying for the mortgage in the long run.
“Those that cannot afford any additional fat on the mortgage will end up paying a lot more than those who can.”
Moynihan agrees that buyers need to be aware that a better rate would save them more than the stamp duty deal, but says the deal will be attractive to savers who have put aside a deposit and need an helping hand to get over the line.
“Anyone saving a deposit of 20 per cent has worked hard and then they have to come up with stamp duty. I think this will be a great help to people.”
“The sums will tell you you’re better off going for a lower rate over 20 years. However, this will get you into the home of your dreams now rather than saving another €2,000.”
3. What does this say about the Irish mortgage market at the moment?
Moynihan says the BoI move shows how willing banks are to lend, but also how constrained they are when it comes to competition. In a market where high street banks can’t compete on rates, they have to find other margins.
“Mortgage rates are 4 to 4.5 per cent for a first time buyer, and I don’t imagine we’ll see a big shift down in rates. I’d like to see competition on rates but the banking system in Ireland isn’t stable enough.”
Would this offer appeal to you?
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