Permanent TSB to overhaul mortgage rates

State-owned Permanent TSB will completely overhaul the interest rates it charges on its mortgage products from tomorrow.

Single interest rate for all standard variable rate mortgages will be replaced by a different charge depending on how much the customer wants to borrow compared with the value of the house.

Director of lending Ger Mitchell said: “This is a much more sophisticated pricing model for mortgages which will allow us to reward customers who have a lower risk profile while charging a higher rate from customers who represent a higher risk by virtue of the amount of money they are borrowing relative to the value of the property.”

Anybody looking to buy a house and who is looking to borrow less than 50% of the price can borrow at 3.95%, which is 0.39% of the current SVR of 4.34%.

This will increase to 4.05% for a customer looking to borrow less than 60% of the house value; 4.15% to borrow less than 70%; 4.20% to borrow less than 80% of the value and 4.45% for less than 90%.

The bank will extend the offer to customers of other financial institutions who want to switch but who are not selling their houses.

PTSB is struggling to return to profitability. It is waiting for the European Commission to approve its restructuring plan to see it split into three units: a good bank, an asset management unit for its troubled assets and a separate UK business. Over half of its total loan book are mostly loss-making tracker mortgages.

In another report issued yesterday, a survey by the Professional Insurance Brokers Association (PIBA) found that there was a 13% surge in demand for mortgages over the first quarter of the year.

Demand is coming primarily from first-time buyers and mortgage holders looking to trade up. Rachel Doyle, chief operations officer at the association, says brokers are now seeing “the emergence of a three-tier market — Dublin and its commuter towns form the top tier, then larger cities such as Cork and Galway and thirdly, the rest of the country.”

The survey also found that increased demand was not being serviced by banks because of prohibitive lending criteria. Although the last PIBA survey over the last three months of 2012 showed an increased willingness to engage with customers in terms of restructuring solutions, that trend did not follow through to the first quarter of this year.