KBC offering reduced fixed rates to prevent mortgage switchers

Customers opting into a five-year fixed mortgage will get a rate of 4.5pc, compared to an existing rate of 5.4pc, while those opting for a two-year fixed rate will get a rate of 4.4pc, compared to an existing rate of 4.65pc.

Those already on fixed mortgages will see no change.

A further discount of 0.2 percentage points is available for the life of the mortgage to those who get their salary paid into a KBC current account and pay the mortgage by direct debit.

The bank said that could save home owners as much as €322 a year, based on the rate of a 20-year €250,000 mortgage being reduced to 4.3pc from KBC’s current standard variable rate of 4.5pc.

“We are committed to rewarding customers who do more of their banking through KBC and we are seeing a positive response from consumers to our mortgage offering and full range of retail banking products,” KBC Ireland head of retail banking Dara Deering said.

“We have had a strong customer reaction to our 0.2pc current account mortgage discount offer so far with over 90pc of those switching their mortgage to KBC also opening a KBC Current Account,” she added.

Banks have been battling to attract mortgage holders in recent months with a series of cuts to both fixed and variable mortgage rates.

Earlier this month Ulster Bank announced it was cutting its standard variable rate to 4.3pc, effective from next month, in its first variable rate cut in nearly two years.

AIB cut rates for new and existing customers in October as the bank’s financial position improved. Permanent TSB and Bank of Ireland recently announced rate cuts for new customers.

Figures recently released by the Central Bank showed that the average variable rate on a new mortgage here was 4.26pc in December, compared to a Eurozone average variable mortgage rate of 2.47pc.

Earlier this week Fine Gael MEP Brian Hayes called for the Competition and Consumer Protection Commission to intervene, saying there should be “a thorough investigation into the arguments that current standard variable rates do not reflect market conditions.”

“It must be considered that ECB interest rates are at an all-time low of 0.05pc. This low interest rate environment has been reflected in many Eurozone countries through lower variable rates but in Ireland banks are still comfortable offering variable rates of over 4pc,” Mr Hayes said.

Switchers aren’t affected by the Central Bank’s new mortgage caps, which sparked a rush in mortgage applications at the end of last year.

Mortgage approvals rose by almost 60pc in the last three months of 2014.