Woodkirk Stone
A typical KBC Bank Ireland mortgage borrower will be worse off by more than € 2,000 a year if their loan is sold to Bank of Ireland and sets a new interest rate afterwards, an advocate said from consumers to competition regulators reviewing the sale.
he sale of KBC’s Irish mortgages is currently being assessed by the Competition and Consumer Protection Commission (CCPC), which has invited submissions on the implications of the transaction.
“KBC’s exit from the Irish mortgage market will significantly reduce competition and lead to even higher mortgage rates,” Brendan Burgess, founder of the Askaboutmoney consumer credit website, said in his communication.
If the deal comes to fruition, it should only be on condition that the BoI operates KBC’s assets independently or the bank commits to no longer offer cash back mortgages and to offer the same. loan rates to new and existing customers, Mr. Burgess said.
Otherwise, existing KBC customers will pay much higher rates on their mortgages, he said.
A sale would not trigger immediate changes in clients’ mortgage rates, but he argued that they would potentially face higher interest in the future, including when their current fixed-rate mortgage periods expire. two, three and five years.
He cited the example of a typical KBC client with a loan of less than 80% of the value of his mortgage loan of € 300,000 and whose fixed rate expires today. They could repair again for three years at 2.3 pc with KBC.
But they risk paying 0.7% more interest if their loan is with the BoI, adding € 2,100 in additional interest each year, he said.
Customers would have the option of switching to another provider, if they qualified for a new mortgage loan approval, but this is more complicated and would also require legal work to secure the home loan for the new lender.
The proposed acquisition by Bank of Ireland of the € 9 billion in productive assets of KBC Bank Ireland is currently being examined by the competition watchdog.
The so-called “Phase 2†CCPC investigation, which could take more than four months to complete, is an unexpected obstacle to consolidation of the Irish banking system as foreign-owned KBC and Ulster Bank exit the market.
Mr Burgess said that if KBC left it was better if the mortgage portfolio was taken over by an active lender (such as the BoI) than by a fund.
The sale of KBC comes at the same time as Ulster exits the market and will leave only three retail banks in Ireland, an unusual level of concentration in most sectors of the economy and all the more so given the bank holdings of State.
While non-bank lenders such as Avant, Dilosk and Finance Ireland offer some competition in mortgages, their combined market share is less than 10 percent.
Belgian company KBC Bank Ireland announced in April that it intends to exit the Irish market and enter into a memorandum of understanding to sell its consumer banking business to Bank of Ireland.
AIB has reached an agreement to acquire Ulster Bank’s € 4.2 billion portfolio of commercial and productive business loans, while Permanent TSB is negotiating terms to take over € 7.6 billion in mortgages, SME lending and asset financing activities of Ulster Bank. NatWest could take a stake in PTSB as part of the deal.
These agreements will also require the approval of the PIC.