There are a number of choices available to first-time buyers, both in terms of mortgage product choice and — perhaps more importantly — rate choice. We're here to advise you on the alternatives.
Choosing a mortgage lender
The following lenders provide mortgage facilities in Ireland, and the market is far more competitive than it was two to three years ago:
- AIB — one of the "big two" banks, the other being Bank of Ireland. The majority holding in the bank is held by the Irish Government.
- Haven Mortgages — part of the AIB group, offering a range of competitive variable and fixed rates. Haven became part of AIB following the transfer of the EBS business in 2008.
- Bank of Ireland — hold a significant share of the Irish mortgage market and offer cash back as part of their marketing strategy.
- EBS — a subsidiary of AIB group, having become part of AIB following the restructuring of banks after the Government bank bailout in 2008.
- KBC — provided important competition in the Irish mortgage market, and are part of a large European banking group.
- Ulster Bank — announced they are pulling out of Ireland, but continue to trade during the wind-down process.
- Permanent TSB — a public company with the majority share held by the Irish Government, and a long-established lender in the Irish market.
- Finance Ireland — a non-bank lender offering competitive mortgages and flexible underwriting.
- ICS Mortgages — another non-bank mortgage lender offering competitive rates. They also specialise in buy-to-let mortgages and have a number of innovative products in this market.
- Avant Money — one of the latest lenders to enter the mortgage market. They distribute their mortgages through a broker network and offer very low rates for mortgages with low loan-to-value ratios.
What mortgage products are available to first-time buyers?
The key elements of a mortgage product are as follows:
- Term — the longer the term the more interest you pay, but the lower the monthly repayments. You need to strike an affordable balance.
- Rate — variable or fixed. If fixed, what rate will you move to once the fixed period ends?
- Mixed rates — you can apportion your mortgage between variable and fixed, balancing your risk.
Annuity mortgages
The vast majority of mortgages — whether for first-time buyers, remortgages or investors — are classified as annuity mortgages.
An annuity mortgage works so that repayments are spread evenly over the term. Within each repayment is a capital element and an interest element; the capital element reduces the amount owing, with the interest covering the interest as it arises.
Over time the capital reduces to zero and your mortgage is paid off in full. In the early years the bulk of the repayments go towards interest, and it's surprising how slowly the capital balance reduces — our mortgage calculator shows the capital and interest split in detail.
Interest-only mortgages
As the name suggests, an interest-only mortgage is one where only interest is paid and the capital balance never reduces. Up until 2007 this was a popular choice, particularly with investors who banked on rising property values. The housing downturn has severely curtailed this product, with interest-only terms generally only offered to applicants with high equity in their property or portfolio.
Offset mortgages
This product is not currently available on the market. By combining your current account with your mortgage account you could make significant savings on your mortgage interest bill and reduce the term of your mortgage — naturally depending on the balance held in your current account.
Overpaying your mortgage
A less sophisticated way of achieving a similar result is to overpay your mortgage as you go, ensuring your interest is calculated on a lower capital balance. The main difference from offsetting is that with overpayment you cannot take back the money you've overpaid. Our consultants are happy to explain the workings of this competitive option.
What rate choices are available?
- Variable rate mortgages — most mortgages in Ireland are on a variable rate. Rates are adjusted in line with a bank's underlying cost of funds and competitive pressure, and vary from lender to lender and by loan-to-value — lower LTV mortgages attract cheaper rates.
- Fixed rate mortgages — fixed rates fix your repayment for a chosen period, typically 1 to 10 years. The price of fixed rates is set by reference to the market's current view on where rates are headed.
- Split rates (mixing and matching) — an attractive option is to split your mortgage into partially fixed and partially variable. You can choose the split percentage yourself, in consultation with your consultant — a good way of hedging your bets. Most lenders offer this facility.
Discounted mortgages
Some lenders offer mortgage products with attractive rates at the outset to entice customers with low initial payments. As long as there's no downside in the follow-on rate (the rate you move to after the initial period), these can be good value — but don't make a decision on the basis of an initial rate alone.
Why use Mortgages.ie as your adviser
Established for over 25 years, our clients benefit from our experience and knowledge with free access to our advice and services. Your mortgage is too important a decision not to take professional advice, and we're here to help you all the way.
