Scottish bank’s mortagage undercutting Irish lenders

By Andrew Bushe

DUBLIN — In what may be just the first foray by other EU financial institutions into the Irish market, the Bank of Scotland has become the first foreign competitor to offer cut-rate mortgages in a move that seems set to shake up the booming property trade.

Beginning last Monday, BofS began offering a variable mortgage at 4.1 percent, which undercuts most of the Irish competition by a full 1 percent.

Borrowers taking out a £100,000 mortgage could save about £750 to £1,150 with BofS when compared to the rates of Irish lenders.

Irish mortgage providers have been accused of ramping up their mortgage profits as interests rates have dropped since the introduction of the euro in January.

The lenders claim they have not passed on the full interest-rate cuts as they have to maintain an attractive interest rate for customers who have savings and deposit accounts with them.

In a trend that may be followed by other foreign mortgage providers, the BofS service will be available via a freephone from Edinburgh on a direct sales basis or through independent brokers so no expensive branch network or staff in Ireland will be needed.

The bank has already been accused of being "opportunistic" and "cherry picking" as the offer is limited to those seeking a loan of 80 percent of the value of their home.

However, added to that will be the stamp duty and legal fees so the final figure could be about 85 percent.

This is regarded as the "safe" sector of the market and will rule out many hard-pressed first-time borrowers who are mortgaging themselves to the hilt in an effort to get a foot on the first rung of the property ladder.

Susan Rice, BofS’s managing director of personal banking, said a provisional quotation would be provided over the phone in minutes. When a mortgage pack is completed and posted back approval will be given within a day, pending valuation of the property.

She said thBofS is the cheapest providers of mortgages in the UK and it would be using the existing infrastructure for Irish customers.

The bank regarded the Irish market as "robust and buoyant" and also a healthy one.

"We intend to keep ourselves positioned as a low-cost mortgage provider," Rice said. "We are coming in that way. This is not a loss leader. We are not losing money on this.

"This is the way we will position ourselves in the future. What we expect to do is shake up the market to some extent by coming in at the rate we are."