Irish Independent Monday May 17th 2010
Ulster Bank is to make a major bid to get back into the first-time buyer mortgage market by offering a home loan that has a discount for the life of the mortgage.
Lending to first-time buyers is dominated by AIB, Bank of Ireland and EBS at the moment, although lending to new buyers is half of what it was during the housing boom.
Today Ulster Bank is to launch a standard variable rate mortgage for new buyers which is promises will always be 0.78pc cheaper that its main standard variable rate, the Irish Independent has learned.
The new discounted rate will be 3.0pc, compared with the bank’s normal standard variable rate of 3.85pc, head of lending and insurance Derek Wilson said the bank will also offer €500 in cash to first-time buyers who switch their current account to it. Those who take up this offer will also qualify for loans worth up to 90pc of the value of the property.
For those who do not switch their current account over, Ulster will only loan up to 80pc of the value of the home to new buyers. Mr. Wilson, though, acknowledged that the lifetime discount rate was not the cheapest on the market.
Irish Nationwide offers a 2.74pc standard variable rate for first-time buyers borrowing up to 90pc of the value of the home, according to Frank Conway of Irish Mortgage Coporation.
Ulster Bank, which is headed by Cormac McCarthy, is also making a major push for new customers to get all their financial services from it by offering new borrowers 12 months’ home insurance for the cost of 10 months. This works out at a discount of 17 pc. In addition, it is offering a 7.5pc discount on life assurance.
Mr.Wilson said Royal Bank of Scotland-owned Ulster was anxious to demonstrate that it was open for business in the new buyer category.
The banking boss, when asked how many first-time buyers it was approving, would only say: “Not enough”.
Asked about lending criteria, he said successful mortgage applicants would have to be in a permanent job, demonstrate that they could afford the repayments even if interest rates rise significantly and have a good banking record.
He would not be drawn on the percentage of disposable income the bank would tolerate when assessing whether borrowers would be approved for a loan or how much they can borrow. However, mortgage brokers said as a rough guide lenders would only approve amounts where the repayments were no more that a third of the net take-home pay.
By Charlie Weston Personal Finance Editor