ptsb launch new LTV mortgages for new customers

ptsb has launched a new LTV mortgage today for

• first time buyers
• switchers
• movers

The rate is determined by the LTV at inception. If you repay capital to lower your LTV to a lower band, you don't get the new rate. Likewise, if house prices fall and you move into a higher band, you don't pay the higher rate.

These are apparently 5 separate rates. They are not trackers. ptsb could change these rates separately in future.

Existing SVR customers are not entitled to the new rates although they can apply to ptsb for a new mortgage. (It would cost about €800 in legal fees) They will continue to pay 4.34% irrespective of their current LTV.

I presume that customers on fixed rates move onto the SVR when the fixed rate expires, unless they are entitled to a tracker.

For those on <50% LTV, they should consider switching to ptsb, as the SVR is often much higher e.g. Ulster Bank's or ICS's 4.8%.

There will be legal costs involved.

Brendan Burgess said:

For those on <50% LTV, they should consider switching to ptsb, as the SVR is often much higher e.g. Ulster Bank's or ICS's 4.8%.

There will be legal costs involved.

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I know PTSB aren't the first at this but I wonder if the LTV approach to the applicable interest rate on a mortgage is the simplest step to creating a sustainable mortgage model in Ireland? Applicants are rewarded for putting their own deposit into their home (the more, the better) and they are rewarded by choosing something they can afford.

Of course, that doesn't take into account the attitude of someone that believes the future is so rosy that any punitive interest rate will be outweighed by a gain in the property values but still... interesting times.

When some sense of normality returns, banks will be competing for those will real equity in their properties and so interest rates on lower LTV mortgages should be intense. Possibly wouldn't help people looking to trade up on their existing home but at the same time might regulate the demand to 'get on the property ladder' in preference for building up a healthy lump sum before taking the plunge...

Having just received our letters from EBS advising of .25% increase this has got my attention........roughly how much does anyone know does it cost to move re legal fees etc.
on our PPR mortgage plus top up mortgage combined are >50% LTV so would def be interested in moving if worth our while

Does anyone know if existing PTSB mortgage holders will benefit?

Calico said:

Does anyone know if existing PTSB mortgage holders will benefit?

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As Brendan said, existing customers are not entitled to the new rates although they can apply to PTSB for a new mortgage. I would imagine it'll be a case-by-case consideration for the bank.

rob oyle said:

As Brendan said, existing customers are not entitled to the new rates although they can apply to PTSB for a new mortgage. I would imagine it'll be a case-by-case consideration for the bank.

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Ooops, didn't see that. Think PTSB's 4.34% is the cheapest at the moment anyway after AIB's announced rate hike.

It would be discriminatory for a bank to charge 2 similar customers 2 different rates..I was in UK and complained about something similar another person took it further and either the courts or then FSA told the bank they couldn't ...it cost HSBC a few hundred million...I'm sure being Ireland nonody will bat an eyelid

It's good to see some more competition at the lower LTV's but the differential in the rates for 10% extra equity in your home seem pathetic at 0.05%-0.1%.

A 70% LTV mortgage represents significantly less risk to the bank than an 80% LTV mortgage. In theory, they should be offering a difference of more than 0.05% in rates in return for this decreased risk.

ronaldo said:

It's good to see some more competition at the lower LTV's but the differential in the rates for 10% extra equity in your home seem pathetic at 0.05%-0.1%.

A 70% LTV mortgage represents significantly less risk to the bank than an 80% LTV mortgage. In theory, they should be offering a difference of more than 0.05% in rates in return for this decreased risk.

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I thought that was interesting ok.

they are pricing the additional risk of a mortgage over 80% at 0.5% .

Brendan Burgess said:

I thought that was interesting ok.

they are pricing the additional risk of a mortgage over 80% at 0.5% .

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I think you may have mis-typed or else the original post is incorrect - is the difference not 0.05% for <70% when compared to <80%.

That's only 50 euro on a 100,000 euro mortgage for a year. In my opinion, not enough given the reduction in risk.

Moving above 80% appears to add 0.25% to the rate. I think this is a more reasonable difference when moving LTV's by 10%.

With 4.2% available at <80%, their top rate of 3.95% should really be available for <70%. All in theory of course - I've no idea of the numbers behind it.

Hi Ronaldo

I didn't mistype, but I wasn't very clear either.

They are pricing the additional risk of a mortgage over 80% vs. a mortgage under 50% at 0.5%

< 90% (i.e. >80%) :4.45%
<50%:3.95%
Difference : 0.5%

So they are saying that if you want to borrow over 80%, we will charge you a risk premium of 0.5% over the zero risk case.

Ah right, I get you now.

Without knowing the details on the figures, I'd say this is far too little of a difference.

What are the capital requirements for Irish banks like? I know that, with UK banks, they require about 6 times more capital for 90% LTV mortgages when compared to 60% LTV mortgages.

Assuming Irish banks work on the basis that a higher level LTV requires more capital, and I can't see any reason that it wouldn't, then it's not only the increased risk that should feed into a bigger difference in the rates - the capital requirements should play a part too.

With this in mind, and knowing that PTSB can offer a profitable product at up to 90% LTV at a rate of 4.45%, I would imagine that this is only the tip of the iceberg and we should see some more competitive rates at the lower LTV's coming to the market in the next 1-2 years. The current rises are too frequent and detached from base rates to go on for much longer.

aido71 said:

Having just received our letters from EBS advising of .25% increase this has got my attention........roughly how much does anyone know does it cost to move re legal fees etc.
on our PPR mortgage plus top up mortgage combined are >50% LTV so would def be interested in moving if worth our while

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After you've figured out the stress and cost of moving they might very well raise the interest rate. Burgess stated in the opening post that these are variable rates and can therefore be changed at any time by PTSB. It wouldn't be the first time a bank launches a 'wonderful' product to the public but it only lasts for a year or two.

I got the following rough estimate from a solicitor to switch a mortgage from ptsb to ptsb.

I would assume the following is the procedure..........

ptsb issues loan offer
borrower signs loan offer and new mortgage ( will there be any compliance requirements?)
plus Family Law Declaration ( any family law matters?),
solicitor returns new offer to lender,
on a given day lender confirms, subject to clear searches,
issue of new mortgage funds and, immediately, clearance of old mortgage debt,
solicitor does searches and , if clear, lodges new mortgage in Land Registry. Once new mortgage is registered, ptsb do an "e-discharge" and old mortgage is scrubbed from title.

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Not sure why but I thought land registry fees had gone up massively. Is the 175 correct?

Brendan Burgess said:

I got the following rough estimate from a solicitor to switch a mortgage from ptsb to ptsb.

Land Registry fee|€175|€100 if unregistered
Searches|€150
Solicitor's fee| c.€400| (€350 - €500
Vat |€100
Total|c.€800

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It's a costly enough process then. The difficulty with this is trying to determine the 'sweet spot' of where it becomes worthwhile switching.

It will obviously depend on who your current lender is. Assuming the PTSB rate is cheaper, it then becomes more worthwhile to switch with larger outstanding mortgages - and there will be a level where the mortgage outstanding is low enough to mean that the reduced rate is more than wiped out by the switching fees.

To do these calculations, you need to make some assumptions - assumptions that may not transpire given the fact that the rates with both PTSB and your current lender are variable. However, without these assumptions, it's impossible to determine whether you should switch or not.

My opinion is that such calculations should be done with the expectation that the rate differential between PTSB and your current lender will remain in place for 3 years. You may choose a different timeframe.

With this assumption in mind, and given the above legal fees, you'd need to recoup the €800 via savings in interest over 3 years.

As far as I can see from Ulster Banks website, the best rate for <60% LTV that doesn't require a fee-paying current account is 4.1% - a 0.15% premium over the PTSB <50% LTV product. In this case, to make a switch costing €800 worthwhile, you'd probably need a mortgage of anything over about €175,000.

crunching some figures looking less attractive as(dare i say it) our outstanding mortgage is probably just too low!......Not being particularly business savvy i would have thought Banks would like the idea of taking on customers with a LTV>50% and performing....thereby offering some incentives to move......the current offer just doesnt seem to be enough for this customer anyway...... oh well i guess i should be grateful that i am in this fortunate position with ppr. As for the 'investment' property.............another story entirely!!

I think a lot of people would be skeptical of any new, market-leading rates. Given that it's variable rates, most would expect the bank to raise them as soon as they've locked in a certain number of customers.

This begs the question - would the banks be better offering rates at a slightly higher rate and offering to pay the switchers legal fees? PTSB may have plans to undercut other banks for 10+ years. However, no customer can reasonably expect this. If the bank expect it, they should be able to pay legals in return for a 0.1-0.2% increase in the underlying rate.

ronaldo said:

With this in mind, and knowing that PTSB can offer a profitable product at up to 90% LTV at a rate of 4.45%, I would imagine that this is only the tip of the iceberg and we should see some more competitive rates at the lower LTV's coming to the market in the next 1-2 years. The current rises are too frequent and detached from base rates to go on for much longer.

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That's what I was thinking... with these lower LTV offerings, the focus in Ireland might actually become on getting a susbstantial deposit saved before going into the market, rather than individuals stretching themselves too far.
On the banking front, if the banks become competitive on these products it will only serve to concentrate minds on getting closer to lower rates. The cost of switching may become the stumbling block to any real movement in the market though.