Ulster Bank 'self-inflicted review will mean Irish mortgages will remain costliest in Europe'

Uncertainty over future of Ulster Bank  helping big two mortgage lenders tighten further their grip on market
Ulster Bank 'self-inflicted review will mean Irish mortgages will remain costliest in Europe'

Ulster Bank announced cuts to many of its fixed-rate mortgage loans that feature a reduction in its five-year rate to 2.55%.  Picture Dan Linehan

The uncertainty over the future of Ulster Bank is already helping the big two mortgage lenders, AIB and Bank of Ireland tighten further their grip over the market, and means home loan rates here will remain among the costliest in Europe, a leading broker has warned.

Michael Dowling, who has held senior positions in broker business groups, said that the uncertainty over Ulster Bank has been self-inflicted, after its own parent group, NatWest, had ordered a review of its operations in the Republic. 

Since that news of the review broke in September, Ulster Bank has been affected by the uncertainty because potential customers and the brokers who help sell the bank's competitive mortgages have been thrown into confusion over its future, Mr Dowling said. 

That has led to impaired competition despite the entry of new lenders like the Spanish-owned lender Avant Money this autumn. 

Cuts to fixed-rate mortgage loans


Ulster Bank on Tuesday announced cuts to many of its fixed-rate mortgage loans that feature a reduction in its five-year rate to 2.55%, at a loan-to-value of up to 90% of the property price.                         

"Part of me would say that it is them (Ulster) letting everyone know they are still here and wanting to maintain their position by offering fixed rates that are, to be fair to them, very competitive in different categories," Mr Dowling said. 

He said that Ulster Bank was facing negative publicity about whether it will be sold. 

"That's the big problem Ulster has. They would be well supported by brokers because they are very competitive," he said.       

"But it is competition for the banks that will drive rates down and I think what Ulster announced today is in response to Avant in terms of their entry to the market," he said. 

He said that AIB and Bank of Ireland hadn't responded to Avant in any significant way and have been able to live with the challenges mounted by Ulster and KBC Bank offering low mortgage rates.        

"The banks are taking the view that Avant will get a certain slice of business and they are happy to lose a certain slice of business knowing that the distribution channels they have got and their sheer size that they are going to get the same level of business," Mr Dowling said. 

"So, are AIB and Ulster Bank shaking in their boots because of Avant? Absolutely no way, not at all," he said. 

AIB and Bank of Ireland have a combined share of over 58% of the existing mortgage market, Permanent TSB has a 15% share, and Ulster Bank and KBC have shares of around 14% and 11%, according to Mr Dowling.

Ciarán Coyle, Ulster Bank managing director of personal banking, said the bank was also offering customers "a safer, quicker and more convenient way" to track their home loan application online. 

Central Bank surveys have repeatedly shown that Irish banks charge among the third or fourth highest rates in the eurozone for their mortgages. Even as wholesale market rates have tumbled to rock-bottom levels, bank chiefs have argued that their wholesale and regulatory costs are higher in lending out home loans in Ireland than elsewhere.

More in this section

News Wrap

A lunchtime summary of content highlights on the Irish Examiner website. Delivered at 1pm each day.

Sign up

Our Covid-free newsletter brings together some of the best bits from irishexaminer.com, as chosen by our editor, direct to your inbox every Monday.

Sign up