Nov 1, 2005

reland - Getting a mortgage

There are now more than 15 mortgage providers in Ireland.

The basics offered by most institutions are quite similar. Generally one-year fixed interest rates range between 2.55 per cent to about 3.3 per cent.

Two-year fixed rates start at about 3.15 per cent rising to about 3.4 per cent.

First-time buyers are a key group for most banks and building societies - many offer them special discount rates. An example of this is Bank of Ireland, which offers first-timers a six-month discount variable rate of 2.49 per cent, or a one-year variable discount rate of 2.69 per cent.

Another tactic used is offering first-time buyers the chance to defer the start of their repayments. Both Bank of Ireland and AIB allow first-timers to defer repayments until up to three months after they take out their loan.

First-time buyers can also be lured by the term of their loan. Generally Irish mortgages do not exceed 30 years, but AIB offers first-time buyers a maximum loan term of 35 years, meaning lower repayments over a longer period.

Banks also compete on the percentage of your purchase price they will let you borrow.

The 100 per cent mortgage is the most high-profile development on this front.

This type of mortgage has actually been on the Irish market for decades, but until quite recently its availability was restricted to very specific professional classes. But now there is a greater availability of 100 per cent mortgages out there, with First Active and Bank of Ireland among the institutions offering these mortgages to a wider variety of customers.

The 100 per cent mortgages have received a mixed reaction in Ireland. The financial regulator has cautioned on the dangers of people becoming over stretched and taking on more debt than they can manage.

Flexible or current account mortgages are now more common in Ireland
. In 2003, First Active introduced its Current Account Mortgage, which allows users to pay interest only on the difference between the balance of their current account and their mortgage account.

Earlier this year, National Irish Bank launched its offset mortgage, which allows you to pay interest on the balance of a whole basket of accounts.

The way the account is structured means that every cent you have in credit with the bank (in current accounts and savings accounts) is automatically offset against your mortgage amount, so that you only pay interest on the overall amount you owe the bank.

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