Many of the banks and building societies have been very slow to pass on the latest rate cuts to their customers. Only a few have so far acted but the rates now on offer from these are very attractive.
Lenders point out that they have also kept rates for savers high but nevertheless most were far faster to pass on increases.
At the time of writing, AIB, Tusa and Ulster Bank, among the major lenders, had passed on the surprise half percentage point rate cut that followed the attacks on New York and Washington. First Active had done so for new customers only.
Rates from these institutions are now very competitive. AIB's standard variable rate is now 4.75 per cent while its one-year fixed rate of 4.2 per cent is also a really good deal. However, perhaps its best offer over the longer term is a three-year fixed rate at 4.99 per cent for both new and existing customers.
Unless the global economy stays in protracted downturn for longer than many analysts are now hoping, this is likely to prove very cost effective over the longer run. For those unsure about how low interest rates are likely to fall it could make sense to fix half your loan at this rate and leave the rest variable.
Tusa, the joint venture between Superquinn and Irish Life and Permanent is also offering a variable rate of 4.75 per cent. However, its fixed rates are far more expensive than AIB at 5.4 per cent for one year and 5.5 per cent for three years.
The Ulster Bank variable rate is 5.1 per cent with the discounted rate until August next year of 3.99 per cent. First Active has also announced rate cuts but these have not yet come into effect for existing customers. Its standard variable rate is still a relatively high 5.24 per cent with a discount for the first six months of 4.25 per cent.
Bank of Scotland is also still above 5 per cent, although according to Ms Sarah Wellband, associate director of Rea Mortgage Services, it is likely to fall to around 4.85 per cent. However, the problem with this is that Bank of Scotland does not offer any fixed rates so if rates started to rise in the future you could be stuck with having to stay with a variable rate. It also has a maximum loan of 80 per cent of the value of the home.
However, according to Ms Wellband, the interest rate is not the sole determinant of mortgage choice, otherwise AIB, Bank of Scotland and Tusa would have the entire market.
She points out that some lenders will charge an indemnity bond whereas others will generally waive it. The bond is charged as protection for the lenders if the borrowers should default on payments and is generally applicable only to loans above 80 per cent in value.
"This bond can be as high as £800 (1,016) on a £120,000 (152,369) loan. ICS and First Active will generally waive this, whereas EBS will not." However, almost all lenders do waive this bond from time to time and it is always worth checking.
An additional incentive for borrowers going through brokers such as Rea is the possibility of receiving refunded commission payments. Some of the lenders pay large amounts of commission to brokers who bring them new business. This can be as high as 1 per cent of the value of the loan, or say £1,200 (1,524) on a £120,000 (152,369) loan. Rea will refund this commission to a client in lieu of fees of £1,495 (1,898) before VAT which also includes solicitors' fees.
Both ICS and Irish Permanent pay these high commissions whereas EBS will pay half that amount at £600 (762). Others such as Tusa pay no commission to brokers. So all in all if you can easily afford your mortgage payments you are probably better off going to the cheapest lenders.
