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Irish bank KBC’s mortgage rate cuts to spark lender price war

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  • 27/10/2016
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Irish bank KBC’s mortgage rate cuts to spark lender price war
Mortgage rate cuts by Irish bank KBC, which allow customers to benefit from a decrease of up to 0.60%, could kick start a price war, experts predict.

The cuts apply across its range of fixed and variable mortgage rates available to first-time buyers, movers and product switchers.

Borrowers with a current account at KBC receive an extra 0.20% discount.

The cuts, including the current account discount, range from 0.04% to 0.60%. Speaking to The Times, Owen Callan, analyst with Investec Ireland, said the rate cuts and increased political pressure may drive down mortgage costs this year and the next, with the major lenders likely to adopt the same strategy.

Callan said: “We would expect…similar 0.25% cuts in lending rates by the rest of the major providers during the fourth quarter of the year, with downward pressure likely to remain on mortgage pricing during 2017, particularly with niche new entrants to the Irish market such as Frank Money expected to offer mortgage rates below 3%.”

Eddie Dillon, director of product with KBC Bank Ireland, said the reduced rates made KBC’s mortgages the most competitive in the market.

Brian Hayes, a Fine Gael MEP, told The Times KBC’s reductions were a sign of healthy competition coming into the market but said banks were still dragging their heels on variable rates.

He said: “Based on the Central Bank’s recent figures, Irish variable mortgage rates have, on average, remained between 3% and 4% since 2011. During this five-year period the main European Central Bank (ECB) interest rate has come down by 1.5%.

“The average rate for a variable mortgage in the eurozone has come down by around 1.5% per cent since 2011, which shows that other eurozone banks are clearly linking their mortgages rates closely to the ECB interest rate. It is quite scandalous that Irish banks are not doing the same,” he added.

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